Natural justice in penalty proceedings requires disclosure or inspection of relied-on documents before final action

Penalty proceedings based on adverse material require the affected person to be supplied the relied-on documents or given a real opportunity to inspect them before final decision. Where the notice proposing penalty refers to documents and the request for copies is not met, imposing penalty without furnishing those materials or allowing inspection breaches the requirements of fairness and natural justice. On the facts stated, the penalty order was set aside for violation of natural justice.

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Issues: Whether the penalty order levied under Section 67 of the KVAT Act was liable to be set aside for denial of copies or inspection of the documents relied on in the notice.

Analysis: The notice proposing penalty relied on several documents, but the person proceeded against sought copies of those documents and received no response. The penalty was then imposed without either furnishing the documents or allowing inspection. Where adverse material is relied upon, fairness requires that the affected person be given the material or an opportunity to peruse it before a final decision is taken.

Conclusion: The penalty order was passed in violation of the principles of natural justice and was set aside.

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