2000 (7) TMI 936 - HC - VAT and Sales Tax

Revoking Certificate Without Fair Hearing Violates Audi Alteram Partem Rule, Court Quashes Decision

The Court held that the withdrawal of the eligibility certificate without proper notice and hearing violated the rule of audi alteram partem. The decision ... Audi alteram partem - withdrawal of eligibility certificate - validity of screening committee decision - consequential assessment proceedings - statutory effect of conditions in Form S.T.70Audi alteram partem - withdrawal of eligibility certificate - validity of screening committee decision - Validity of the decision of the Lower Level Screening Committee to withdraw the eligibility certificate and of the Higher Level Screening Committee to confirm that withdrawal in the absence of notice and opportunity of hearing. - HELD THAT: - The Court held that the eligibility certificate, once granted, conferred a valuable right on the petitioner to seek exemption and that the withdrawal of that certificate by the Lower Level Screening Committee without issuing an action oriented notice and giving an opportunity of hearing violated the rule of audi alteram partem. The consequential confirmation by the Higher Level Screening Committee suffered from the same infirmity. Because there was no dispute between the parties that no notice or hearing was afforded before withdrawal and confirmation, the impugned decisions could not stand and were liable to be set aside. The Court therefore quashed the orders withdrawing and confirming withdrawal of the eligibility certificate and directed that fresh consideration be allowed with notice and hearing. [Paras 8, 9]Impugned withdrawal of the eligibility certificate and its confirmation are invalidated for breach of the rule of audi alteram partem; the matters are to be re decided after giving notice and opportunity of hearing.Consequential assessment proceedings - Validity of the assessing authority's order initiating tax liability proceedings consequent to withdrawal of the eligibility certificate. - HELD THAT: - The Court found that the order of the Excise and Taxation Officer cum Assessing Authority holding the petitioner liable to pay tax for the assessment years 1995 96 and 1996 97 flowed from the invalid withdrawal of the eligibility certificate. Since the withdrawal and its confirmation were quashed for failure to afford the petitioner a hearing, the consequential assessment action was likewise declared illegal and quashed. [Paras 11]The consequential action by the Assessing Authority is quashed; the Assessing Authority may act only after the competent authority has re decided the eligibility issue following notice and hearing.Statutory effect of conditions in Form S.T.70 - Whether the conditions stipulated in Form S.T.70 are mandatory and whether non compliance could justify withdrawal of an eligibility certificate was not finally decided but left for fresh consideration. - HELD THAT: - The Court declined to express a final opinion on whether the stipulations in Form S.T.70 (referred to in rule 28A(5)) are mandatory or directory and whether non compliance by the petitioner justified withdrawal of the certificate. While observing prima facie that the stipulations may be statutory and non compliance could justify rejection, the Court held that these questions should be examined and decided by the competent authority after affording the petitioner a reasonable opportunity of hearing. Consequently, the matter was remitted to the competent authority for fresh adjudication on merits and fact with notice and hearing. [Paras 10, 11]Issue left open for decision by the competent authority; remitted for fresh consideration after giving notice and opportunity of hearing to the petitioner.Final Conclusion: Writ petition allowed; the order withdrawing the eligibility certificate and the confirmation thereof are quashed for breach of audi alteram partem, the consequential assessment orders are quashed, and the competent authority is free to pass fresh orders after giving the petitioner a reasonable opportunity of hearing, including consideration of compliance with conditions in Form S.T.70. Issues:Whether the eligibility certificate granted to the petitioner could be withdrawn without following the rule of audi alteram partemRs.Analysis:The petitioner, engaged in manufacturing and sale of yarn, applied for an eligibility certificate in 1995-96 under the Haryana General Sales Tax Rules, 1975. The certificate was granted entitling tax exemption. However, the Lower Level Screening Committee decided to withdraw the certificate due to alleged non-compliance with land use permission regulations.The petitioner challenged this decision through appeals, arguing violation of natural justice rules and arbitrariness. The Higher Level Screening Committee upheld the decision citing lack of necessary documents. The Assessing Authority then demanded tax payment for the relevant years.The petitioner contended that the withdrawal decision lacked proper hearing and was ultra vires to the rules. The Respondents argued that the petitioner did not fulfill the necessary requirements for the certificate issuance.The Court, after considering the arguments, held that the withdrawal decision violated the rule of audi alteram partem. The eligibility certificate granted a valuable right to the petitioner, and the decision to withdraw it without proper notice and hearing was deemed invalid. The Higher Level Screening Committee's decision was also quashed for the same reason.The Court refrained from deciding whether the conditions in the application form were mandatory or directory. It was suggested that these issues should be examined by the competent authority with proper notice and hearing. The writ petition was allowed, declaring the withdrawal and consequential actions illegal. The case was remanded for a fresh decision with both parties given an opportunity to present their arguments.In conclusion, the judgment emphasized the importance of following natural justice principles and providing a fair hearing before taking decisions that affect valuable rights granted through official certificates.