Natural justice requires express disposal of adjournment requests before finalising assessment and reversing input tax credit.

An adjournment request made before the due date had to be expressly considered under the governing procedure before finalising the assessment; passing orders without dealing with that request denied the assessee an effective opportunity to respond to the proposed reversal of input tax credit and constituted a breach of natural justice. The Madras HC therefore set aside the assessment orders and remitted the matter for fresh assessment after giving due opportunity to the assessee.

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Issues: Whether the assessment orders were liable to be set aside for having been passed without considering the assessee's request for adjournment and without affording an effective opportunity to respond to the proposed reversal of input tax credit.

Analysis: The noticee had sought a month's accommodation to file a reply to the revision notices proposing disallowance and reversal of input tax credit. Clause 11 of the departmental circular relied upon required the assessing authority to consider and pass orders on an adjournment application where such a request was made before the date fixed. The fact that the assessment orders were passed after the expiry of the requested period did not cure the defect, because the assessee was entitled to know whether the request for accommodation had been accepted or rejected. Since the request was not dealt with and the assessee was taken by surprise, the proceedings suffered from breach of natural justice.

Conclusion: The assessment orders were set aside and the matter was remitted for fresh assessment after giving due opportunity to the assessee.

Ratio Decidendi: An adjournment request that is required to be considered under the governing procedure must be expressly dealt with before finalising the assessment, and failure to do so vitiates the order for breach of natural justice.

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