Natural justice in tax assessment requires disclosure of enforcement report before adverse input tax credit action

An assessment based on an enforcement report could not be sustained where the dealer was not supplied with a copy of the report and was denied a reasonable opportunity to meet the adverse material. The report formed the basis for proposed withdrawal of input tax credit and the assessment, so fairness required disclosure of the report and an opportunity to file objections before finalisation. The assessment was therefore set aside for breach of natural justice, and the matter was remanded for fresh assessment after furnishing the enforcement report and hearing objections.

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Issues: Whether an assessment based on an enforcement report could be sustained when the dealer was not furnished a copy of that report and was not given a reasonable opportunity to object to the adverse material.

Analysis: The assessment was founded on the enforcement officials' report alleging excess input tax credit. The dealer sought disclosure of that report so as to meet the case against it, but the report was withheld on the ground that it was for internal circulation. Since the report formed the basis of the proposed withdrawal of input tax credit and the resultant assessment, fairness required that the dealer be supplied with the material and given an opportunity to file objections before the assessment was finalized.

Conclusion: The assessment could not be sustained for breach of natural justice and was set aside. The matter was remanded for a fresh assessment after furnishing the enforcement report and affording a reasonable opportunity to file objections.

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