Statutory opportunity before licence refusal: failure to disclose adverse material and hear the dealer vitiates the rejection.

A sales tax licence refusal under the M.P. General Sales Tax Act was held invalid because the statutory procedure in rule 4(6) was not followed. Where the Sales Tax Officer is not satisfied about the correctness of turnover particulars, the rule requires further enquiry and an opportunity to the applicant to prove the correctness and completeness of the information before rejection on a best-judgment basis. Here, the departmental material was not disclosed and no effective opportunity was given, so the adverse orders breached the mandatory safeguard and could not stand. The applications were directed to be reconsidered after compliance with the prescribed procedure and fair hearing requirements.

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Issues: Whether the refusal of a sales tax licence under section 13 of the M.P. General Sales Tax Act, 1958 was invalid for non-compliance with rule 4(6) of the M.P. General Sales Tax Rules, 1959 and denial of an opportunity to the dealer to prove the correctness and completeness of the turnover particulars.

Analysis: Rule 4(5) permits grant of licence only when the Sales Tax Officer is satisfied, after due enquiry, about the correctness of the turnover and particulars furnished. Where he is not so satisfied, rule 4(6) requires further enquiry and, before determining turnover to the best of judgment and rejecting the application, an opportunity must be given to the applicant to prove the correctness and completeness of the information supplied. On the facts, the material relied upon by the department had not been disclosed to the petitioners and no effective opportunity was afforded before the adverse orders were made. The orders therefore violated the mandatory procedural safeguard contained in rule 4(6) and could not be sustained.

Conclusion: The refusal of licence was illegal for breach of rule 4(6), and the petitioners were entitled to have their applications reconsidered after being given the prescribed opportunity.

Final Conclusion: The impugned orders were set aside and the matters were remitted for fresh decision in accordance with the statutory procedure and fair hearing requirements.

Ratio Decidendi: When a taxing authority is required by rule to give an applicant an opportunity to prove the correctness and completeness of turnover particulars before rejecting a licence application, failure to afford that opportunity vitiates the order.

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