2024 (5) TMI 722 - HC - VAT and Sales Tax

Petitioner's challenge to tax adjudication order dismissed as cross-examination not absolute right in natural justice

The Andhra Pradesh HC dismissed a tax revision case where the petitioner challenged an adjudication order claiming violation of natural justice principles ... Violation of principles of natural justice - reliance to be placed on the report of the Commercial Tax Department at Bombay without affording an opportunity to the petitioner to cross-examine the Officers of Commercial Tax Department of the reports at Bombay - HELD THAT:- In Shalini Steels Pvt. Ltd. [2011 (2) TMI 554 - ANDHRA PRADESH HIGH COURT], the Andhra Pradesh High Court held that the cross-examination of a witness, on whose statement reliance is placed by the adjudicating authority, is no doubt a facet of the principles of natural justice, however, natural justice is no unruly horse, no lurking landmine, nor a judicial cure-all. If fairness is shown by the decision maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to administrative realties and other factors of a given case can be exasperating. In Telstar Travels Private Limited v. Enforcement Directorate [2013 (2) TMI 396 - SUPREME COURT] the adjudication order was passed under the Foreign Exchange Regulation Act, 1973 and the challenge was also on the ground of violation of the principles of natural justice for not providing the opportunity of cross examination. It was argued in that case that the adjudicating authority had relied upon the statements and the reports which were inadmissible in evidence as the request for an opportunity to cross examine the witnesses had been declined and thereby violating the principles of natural justice. The Hon’ble Apex Court observed that the rules of procedure do not apply to adjudication proceedings. But that does not mean that in a given situation, cross examination may not be permitted to test the veracity of a deposition sought to be issued against a party against whom action is proposed to be taken. The enquiry report is based on record, F-forms were not issued by the Tax Department to the petitioner’s 5 alleged agents and those were doing business in goods other than those claimed by the petitioner assessee. Some of the agents were not available at the addresses given. To disprove those facts of the report it was not necessary to afford opportunity of cross examination of the Officers of the Tax Department at Bombay. Those facts if not correct, could have been controverted by the petitioner by filing material to evidence that those agents were at the addresses given and they were dealing in goods not other than those claimed by the petitioner as also that F-forms were issued to those agents by the Tax Department at Bombay. In passing the impugned orders there is no violation of the principles of natural justice. It could not be argued as to what prejudice has been caused to the petitioner for want of opportunity of cross examination. The procedure followed is fair and just, complying with the rules of natural justice - the procedure followed is just, fair and in consonance with the principles of natural justice. No opportunity of cross examination to the petitioner was required to be given. It has not resulted in violation of the principles of natural justice so as to interfere with the order under challenge. No case for interference is made out in the exercise of revision jurisdiction - The Tax Revision Case is dismissed. Issues Involved:1. Validity of the report of the Commercial Tax Department, Bombay without cross-examination.2. Compliance with principles of natural justice.Summary:Facts of the Case:The petitioner, M/s. Foods, Fats and Fertilizers Limited, challenged the Order dated 31.12.2001 by the Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad. The petitioner was granted an exemption on a turnover of Rs. 1,64,15,660/- for the year 1991-92 by the Commercial Tax Officer (CTO). However, the Deputy Commissioner (Commercial Tax) revised the order, bringing a turnover of Rs. 1,52,12,755/- to tax as inter-state sales. The Appellate Tribunal dismissed the petitioner's appeal.Submissions of the learned Counsel for the Petitioner:The petitioner argued that the opportunity for cross-examination was not provided, violating the principles of natural justice. The petitioner cited State of Kerala v. K. T. Shaduli Grocery Dealer (1977) 2 SCC 777 to support the argument.Submissions of the learned GP:The Government Pleader contended that the Deputy Commissioner relied on the report from the Commercial Tax Department, Bombay, and that the petitioner was given an opportunity to respond to the show cause notices. The opportunity for cross-examination was not necessary.Question of Law:'Whether the report of the Commercial Tax Department at Bombay could be relied upon without affording an opportunity to the petitioner to cross-examine the Officers of Commercial Tax Department of the reports at BombayRs.'Analysis:The Appellate Tribunal held that cross-examining the officers who issued statements or reports based on records was not required. It referred to the case of State of Kerala v. Shaduli Yousuff 39 STC 478, which stated that tax officers are not bound by technical rules of evidence. The Tribunal also noted that the principles of natural justice do not always necessitate cross-examination.Case Laws:- K. T. Shaduli Grocery Dealer (supra): The Supreme Court held that tax authorities must observe principles of natural justice, but the requirement for cross-examination depends on the facts and circumstances of each case.- Shalini Steels Pvt. Ltd. v. Commr. of Cus. & C. Ex., Hyderabad 2011 (269) E.L.T. 485 (A.P.): The Andhra Pradesh High Court held that the absence of cross-examination does not necessarily violate natural justice unless prejudice is shown.- Telstar Travels Private Limited v. Enforcement Directorate (2013) 9 SCC 549: The Supreme Court stated that cross-examination might be necessary to test the veracity of a deposition, but its denial must show actual prejudice.- State of Uttar Pradesh v. Sudhir Kumar Singh (2021) 19 SCC 706: The Supreme Court emphasized that natural justice is flexible and its breach must show actual prejudice.- SBI v. Rajesh Agarwal (2023) 6 SCC 1: The Supreme Court elaborated that principles of natural justice require fair hearing and opportunity to rebut evidence.- Singrauli Super Thermal Power Station v. Ashwani Kumar Dubey (2023) 8 SCC 35: The Supreme Court held that non-disclosure of a report used in decision-making violates natural justice.Conclusion:The court concluded that the procedure followed was just, fair, and in consonance with the principles of natural justice. No opportunity for cross-examination was required, and no prejudice was shown to have been caused to the petitioner.Result:The Tax Revision Case was dismissed. No order as to costs. Pending miscellaneous petitions, if any, were closed in consequence.