Natural justice in tax proceedings requires cross-examination when affidavits are relied on to impose purchase tax and penalties.

Tax proceedings are quasi-judicial and must satisfy natural justice, including cross-examination where affidavits or other relied-upon material are used against the assessee; the denial of that opportunity vitiated the fairness of the adjudication. The Court also noted that the disputed dealers held registration certificates, so the assessee could not be faulted for treating the purchases as from registered dealers. On that basis, the Tribunal's deletion of purchase tax and penalties was upheld and the matter was answered in favour of the assessee.

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Issues: Whether the Tribunal was justified in deleting the purchase tax and penalties by treating the disputed purchases as purchases from registered dealers, in the context of denial of cross-examination and reliance on the dealers' registration certificates.

Analysis: The assessment and appellate authorities had relied on affidavits and other material to treat the purchases as made from unregistered dealers and to levy purchase tax and penalties. The Tribunal found that the assessee had not been afforded an opportunity to cross-examine the deponents whose affidavits were relied upon, and that this denial affected the fairness of the adjudication. The Court held that tax proceedings are quasi-judicial in nature and that the principles of natural justice apply, including the right to cross-examination where the material relied upon so requires. It further noted that the relevant dealers held registration certificates and the assessee could not be faulted for acting on those certificates.

Conclusion: The Tribunal's view deleting the enhancement was upheld and the reference was answered in favour of the assessee and against the State.

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