Natural justice requires evidence on the true character of an ambiguous contract before refusing witness examination.

Where the true nature of a written commercial agreement is in dispute and the document is said to be ambiguous, relevant evidence must be allowed to explain its substance and the parties' intention. A blanket refusal to permit cross-examination or summon witnesses is not justified by sections 92 and 93 of the Indian Evidence Act without material supporting such exclusion, and a mere apprehension of collusion is insufficient. The denial of that opportunity breaches natural justice, so the matter may be remitted for fresh adjudication with proper evidence and hearing on the transaction's real character.

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Issues: Whether refusal to permit cross-examination and to summon witnesses in support of the assessee's plea as to the true nature of the contract violated natural justice and required remand for fresh adjudication.

Analysis: The dispute turned on the character of the underlying agreement, which had been differently understood by the adjudicatory authorities. The Court held that, where contractual terms are said to be ambiguous or their real substance is in issue, a party must be afforded an opportunity to lead relevant evidence to explain the true intention and essence of the agreement. Sections 92 and 93 of the Indian Evidence Act, 1872 did not justify a blanket refusal at the threshold, and the apprehension of collusion could not be presumed without material. The Court also noted that the appellate authorities could have adopted the further-enquiry procedure and, in view of the likely tax burden on the port trust, the affected party ought to have been heard.

Conclusion: The refusal to permit evidence was held to be contrary to natural justice, and the matter was remitted for fresh adjudication after allowing the relevant witnesses to be examined.

Final Conclusion: The merits of the taxability dispute were left open, but the adjudication was set aside to the extent necessary to ensure a fair hearing and proper evidence on the nature of the transaction.

Ratio Decidendi: Where the true nature of a written commercial arrangement is in dispute and the document is said to be ambiguous, the parties must be allowed to adduce relevant evidence to explain its substance, and a denial of that opportunity constitutes breach of natural justice warranting remand.

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