Natural justice in tax cancellation proceedings requires cross-examination when third-party affidavits are used against the assessee.

In quasi-judicial tax proceedings, an authority relying on a third-party affidavit and supporting photocopies to cancel registration certificates must afford the assessee an effective opportunity to test that material, including cross-examination where the documents and transactions are disputed. Refusal to summon the deponent deprived the assessee of a fair chance to meet the case against it and amounted to denial of reasonable opportunity of being heard under section 7(4) of the Punjab General Sales Tax Act, 1948. The cancellation orders could not stand.

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Issues: Whether the assessee was denied a reasonable opportunity of hearing under section 7(4) of the Punjab General Sales Tax Act, 1948 by refusal to permit cross-examination of the deponent whose affidavit and related third-party documents were relied upon for cancellation of the registration certificates.

Analysis: The cancellation was founded on an affidavit and supporting photocopies produced from a third party, without production of originals, and the assessing authority relied upon that material to hold that the assessee had made undisclosed purchases. In such quasi-judicial tax proceedings, the authority was bound by the principles of natural justice. Where the department relies on a third-party affidavit and connected documents to the prejudice of the assessee, the affected party must ordinarily be given an effective opportunity to test that material by cross-examination, especially when the assessee disputes the genuineness of the documents and the underlying transactions. Refusal to summon the deponent for cross-examination deprived the assessee of a fair chance to meet the case against it.

Conclusion: The refusal to allow cross-examination amounted to denial of reasonable opportunity of being heard, and the cancellation orders could not stand.

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