Natural justice in tax assessment requires disclosure of adverse material before reliance on it against the dealer.

An assessment under the Orissa Value Added Tax Act was held unsustainable where adverse materials and seized documents relied upon were not supplied to the dealer and no effective hearing was given. The authority may gather material behind the dealer's back in fiscal assessment, but any prejudicial material proposed for use against the dealer must be disclosed so it can be rebutted. The rule of audi alteram partem requires that the affected party be confronted with the incriminating material and given a meaningful opportunity to explain it before reliance is placed on it.

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Issues: Whether the assessment made under Section 43 of the Orissa Value Added Tax Act was valid when the adverse materials and seized documents relied upon were not supplied to the dealer and no effective opportunity of hearing was afforded.

Analysis: The assessment was based on a fraud case report and incriminating materials gathered during inspection. The dealer's statement did not show that the specific materials proposed to be used against it were confronted or that its explanation on each allegation was considered. In fiscal assessment proceedings, the assessing authority may collect materials behind the back of the dealer, but any material intended to be used against the dealer must be disclosed so that the dealer can rebut it. The principles of natural justice, particularly the rule of audi alteram partem, require that prejudicial materials be brought to the notice of the affected party before reliance is placed upon them.

Conclusion: The assessment order was unsustainable for violation of natural justice. The dealer was entitled to supply of the incriminating materials relied upon and to a meaningful opportunity to explain them.

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