Natural justice barred withdrawal of a sales tax exemption certificate without notice and hearing, invalidating consequential tax action.

Withdrawal of an eligibility certificate that conferred a sales tax exemption was invalid where the petitioner was not given notice or an opportunity of hearing. The Court applied the rule of audi alteram partem because cancellation of the certificate directly exposed the petitioner to tax liability and affected a valuable right already accrued under the certificate. As no prior hearing was afforded, the withdrawal order was vitiated by breach of natural justice, and the confirming order and consequential assessment action could not stand.

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Issues: Whether the withdrawal of the eligibility certificate and the consequential tax demand could be sustained without giving the petitioner notice and an opportunity of hearing.

Analysis: The eligibility certificate had created a valuable right in favour of the petitioner to claim sales tax exemption. Before withdrawing such certificate, the Screening Committee was required to follow the rule of audi alteram partem because the withdrawal directly exposed the petitioner to tax liability. It was undisputed that no notice or hearing was afforded before the adverse decision was taken. The Court therefore held that the impugned withdrawal order was vitiated by violation of natural justice, and the confirming order and consequential assessment action could not survive.

Conclusion: The withdrawal of the eligibility certificate was illegal for breach of natural justice, and the consequential orders were liable to be quashed.

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