Procedural fairness in tax cancellation proceedings requires valid service and access to adverse material before registration is annulled.

An order cancelling VAT registration from inception could not stand where service of the notice was doubtful and the dealer was not given access to the statement and other material relied on to treat the registration as bogus and infer issuance of bogus bills. The court held that affixation could not be treated as valid service unless the prescribed modes had first failed, and that denial of inspection and opportunity to controvert adverse material rendered the decision-making process procedurally defective. The matter was remitted for a fresh hearing, with the appeal restored for de novo consideration after supplying the relevant record and affording a fair opportunity to respond.

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Issues: (i) Whether the order cancelling registration from inception and the appellate order could stand when the dealer was not shown to have been duly served with the relevant notice and was not given access to the material relied upon against him; (ii) Whether the matter required remand for a fresh decision after affording the dealer a proper opportunity to meet the incriminating material.

Issue (i): Whether the order cancelling registration from inception and the appellate order could stand when the dealer was not shown to have been duly served with the relevant notice and was not given access to the material relied upon against him.

Analysis: The record showed serious doubt about the manner of service, because affixation was treated as service without demonstrating that the statutory modes of service had first failed as required by the Rules. The dealer was also not given a proper opportunity to inspect or controvert the statement and other material relied upon to conclude that the registration was bogus and that bogus bills had been issued. In such a situation, the decision-making process was found to be procedurally defective.

Conclusion: The impugned orders could not be sustained on the existing record.

Issue (ii): Whether the matter required remand for a fresh decision after affording the dealer a proper opportunity to meet the incriminating material.

Analysis: Since the dispute involved disputed factual material bearing on the genuineness of business and the validity of cancellation from inception, fairness required that the dealer be supplied the relevant record and be allowed to meet the adverse material before any final decision was taken. The respondent accepted that course, and the proper remedy was to set aside the Tribunal's order and restore the appeal for rehearing on merits.

Conclusion: The matter was remitted to the Tribunal for a fresh hearing and decision in accordance with law.

Final Conclusion: The dismissal by the Tribunal was set aside and the VAT appeal was restored for de novo consideration after affording the assessee access to the relevant records and a fair opportunity of hearing.

Ratio Decidendi: Where a tax order is founded on adverse material affecting the very basis of registration, the authority must comply with the prescribed mode of service and afford a meaningful opportunity to inspect and answer the material before adjudicating.

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