Natural justice bars sales tax penalty demands without notice, and binding departmental circulars must be followed before levy.

A demand for penal interest or penalty under the sales tax enactments could not be sustained where the assessing authority issued no show-cause notice and gave no opportunity of hearing before passing the order. The departmental circular requiring notice and a reasoned order before imposing such levy was treated as binding on subordinate officers in the absence of any contrary higher-court ruling. Because the prescribed procedure was not followed, the impugned orders were held unsustainable and were set aside, with the matter remitted for fresh consideration after notice and hearing.

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Issues: Whether a demand for penal interest / penalty under the sales tax enactments could be sustained when no notice or opportunity of hearing was given before passing the impugned orders, and whether the departmental circular prescribing such procedure was binding on the assessing authority.

Analysis: The impugned demands were made on the basis of alleged belated payment of additional sales tax, but no show-cause notice had been issued before imposing the levy. The departmental circular directed assessing authorities to issue notice before imposing penalty and to pass a proper order setting out the basis of the demand. The circular was binding on subordinate officers in the absence of any contrary declaration of law by the higher courts. Since the assessing authority did not follow the prescribed procedure, the orders were passed in breach of the circular and without giving the petitioner an opportunity to meet the proposed levy.

Conclusion: The impugned orders were unsustainable and were set aside, with the matter remitted for fresh consideration after issuing notice and affording opportunity of hearing.

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