Natural justice in reassessment and compounding under entertainment tax law: notice and hearing are essential before tax determination.
Reassessment under Section 9(3) of the Gujarat Entertainment Tax Act was held unsustainable where no show cause notice or hearing was provided before the reassessment order, as this breached the statutory procedure and principles of natural justice; the matter was remanded for fresh consideration after opportunity of hearing. On the compounding issue under Section 18, payment of twice the tax payable was treated as sufficient for compounding, and the prosecution was brought to an end. The text states that the impugned order was to be treated as a show cause notice for the remand proceedings.
Issues: (i) Whether the order passed under Section 9(3) of the Gujarat Entertainment Tax Act, 1977 could be sustained when no show cause notice was served before reassessment. (ii) Whether the petitioner could be permitted to compound the offence and avoid prosecution under Section 18 of the Gujarat Entertainment Tax Act, 1977.
Issue (i): Whether the order passed under Section 9(3) of the Gujarat Entertainment Tax Act, 1977 could be sustained when no show cause notice was served before reassessment.
Analysis: The petitioner was not served with any notice calling upon it to show cause before the reassessment order under Section 9(3). The notice issued by the department was only for proposed prosecution. In the absence of notice and opportunity on the reassessment, the order suffered from breach of the statutory procedure and the principles of natural justice.
Conclusion: The reassessment order under Section 9(3) could not be sustained and was liable to be quashed and remanded for fresh decision after opportunity of hearing.
Issue (ii): Whether the petitioner could be permitted to compound the offence and avoid prosecution under Section 18 of the Gujarat Entertainment Tax Act, 1977.
Analysis: The petitioner had deposited twice the amount of tax payable and sought compounding of the offence. On that basis, the prosecution aspect was treated as concluded and no further proceedings were required to continue.
Conclusion: The petitioner was permitted to compound the offence and the prosecution was brought to an end.
Final Conclusion: The reassessment orders were set aside only to the extent of the determination under Section 9(3), the matter was remanded for fresh consideration after treating the impugned order as a show cause notice, and the prosecution aspect stood concluded on compounding.
Ratio Decidendi: An order of reassessment passed without serving a show cause notice and without affording opportunity of hearing is unsustainable, and when compounding is accepted on the prescribed payment, prosecution need not continue.
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