2002 (9) TMI 819 - HC - VAT and Sales Tax

High Court declares tax directions ultra vires, provides relief to petitioner

Nagendra Prasad Versus Commissioner of Commercial Taxes and others

Nagendra Prasad Versus Commissioner of Commercial Taxes and others - [2003] 129 STC 361 (Pat) Issues:Challenge to the direction issued by the Commissioner of Commercial Taxes regarding disallowance of discount on licence fee and excise duty claimed by persons dealing in country liquor.Analysis:The petitioner, engaged in the business of manufacturing and selling country liquor, filed a writ application to quash the direction issued by the Commissioner of Commercial Taxes. The main argument presented was that the Commissioner exceeded his authority by directing the assessing officers to disallow the claimed discounts. The petitioner contended that the Commissioner lacked the power to issue such directions, especially in matters where the assessing authority exercises quasi-judicial powers under the Bihar Finance Act, 1981.The State, represented by learned counsel, argued that the directions issued by the Commissioner were merely guidelines and not mandatory directions. However, the core issue for consideration was whether the Commissioner had the legal authority to issue such directions to the assessing authority under the Act and the Rules. It was acknowledged that the powers exercised by the assessing, appellate, and revisional authorities were quasi-judicial in nature. The State failed to identify any provision within the Act or Rules empowering the Commissioner to issue directions, particularly in matters involving quasi-judicial functions.The legal principle established in previous judgments was cited to support the argument against superior authorities interfering with quasi-judicial functions. Reference was made to the case of Mahadayal Premchandra v. Commercial Tax Officer, where the Supreme Court held that instructions from a superior authority could undermine the public's confidence in fair administration. Additionally, the case of Orient Paper Mills Ltd. v. Union of India emphasized that quasi-judicial powers should not be controlled by directions from higher authorities, as it compromises independence and impartiality in decision-making.Ultimately, the High Court ruled in favor of the petitioner, declaring the directions issued by the Commissioner as ultra vires and quashing them. The consequential notice issued to the petitioner based on the said directions was also set aside. The Court clarified that its decision did not reflect an opinion on the merits of the case and directed the assessing authority to proceed in accordance with the law. Consequently, the writ application was allowed, granting relief to the petitioner.