2010 (4) TMI 139 - SC - VAT / Sales Tax

One-line judicial order without reasons violates natural justice; requires brief rational reasons and remand for de novo hearing

Assistant Commissioner, Commercial Tax Department, Works Contract & Leasing, Kota Versus M/s Shukla & Brothers

SC held that the High Court's one-line order failing to record reasons violated principles of natural justice and the requirement for reasoned judgments; ... Requirement of reasoned judgments - one line order of a High Court - Works Contract under VAT/ Sales Tax - Manufacturing - principle of natural justice ​​- Whether the iron rolling shutters & doors were fixed by the assessee on the shops are taxable or not, when no tax was paid by the assessee on the construction of iron rolling shutters and doors? HELD THAT:- The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Such rule being applicable to the administrative authorities certainly requires that the judgment of the Court should meet with this requirement with higher degree of satisfaction. The order of an administrative authority may not provide reasons like a judgment but the order must be supported by the reasons of rationality. The distinction between passing of an order by an administrative or quasi-judicial authority has practically extinguished and both are required to pass reasoned orders. The contention that the respondent had not manufactured the shutters from the tax paid raw material and also that the contract in question was not impartible but a consequential item for completion of the contract required examination by the High Court. In light of the judgments referred to and relied upon by the parties including the judgment of this Court, it is true that requirement of stating reasons for judicial orders necessarily does not mean a very detailed or lengthy order, but there should be some reasoning recorded by the Court for declining or granting relief to the petitioner. The purpose, as already noticed, is to make the litigant aware of the reasons for which the relief is declined as well as to help the higher Court in assessing the correctness of the view taken by the High Court while disposing off a matter. May be, while dealing with the matter at the admission stage even recording of short listening dealing with the merit of the contentions raised before the High Court may suffice, in contrast, a detailed judgment while matter is being disposed off after final hearing, but in both events, in our view, it is imperative for the High Court to record its own reasoning however short it might be. We are unable to find any infirmity in the arguments advanced on behalf of the Department, that no reasons have been recorded for rejecting the contentions raised, this legal infirmity has, in fact, prejudicially affected the case of the appellant before us. The judgment of the High Court must speak for itself to enable the higher Court to do complete and effective justice between the parties. For the reasons afore-recorded we set aside the order dated 29th February, 2008 and remit the case to the High Court with a request to hear the case de novo and pass appropriate order in accordance with law. To that extent the appeal is allowed. Issues Involved:1. Delay in filing2. Lack of recorded reasons for dismissal by the High Court3. Taxability of iron rolling shutters and doors4. Requirement of reasoned judgments in judicial ordersIssue-wise Detailed Analysis:1. Delay in Filing:The Supreme Court condoned the delay in filing the appeal and granted leave to hear the case under Article 136 of the Constitution of India.2. Lack of Recorded Reasons for Dismissal by the High Court:The appellant argued that the High Court dismissed the revision petition without recording any reasons, causing serious prejudice. The Supreme Court emphasized the necessity of reasoned orders, stating that the High Court should have provided reasons for rejecting the revision petition. The Court underscored that reasons are essential for ensuring transparency, fairness, and enabling higher courts to review decisions effectively.3. Taxability of Iron Rolling Shutters and Doors:The respondent was a contractor for constructing shops and had received payments for the same. The assessing authority levied tax, interest, penalty, and surcharge on the respondent, asserting that the shutters and doors were not manufactured from tax-paid raw material. The Deputy Commissioner (Appeals) and the Rajasthan Tax Board accepted the respondent's plea that the shutters and doors were part of an impartible work contract and thus not taxable. The High Court dismissed the Department's revision petition without addressing the questions of law raised, including the taxability of the shutters and doors.4. Requirement of Reasoned Judgments in Judicial Orders:The Supreme Court reiterated the importance of reasoned judgments, citing several precedents and principles of natural justice. It stated that reasons are the 'soul of orders' and essential for transparency, fairness, and enabling effective appellate review. The Court highlighted that non-recording of reasons could lead to dual infirmities: prejudice to the affected party and hampering proper administration of justice.The Supreme Court cited several cases to support its stance, including:- S.N. Mukherjee v. Union of India, emphasizing the importance of clarity in administrative decisions.- Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India, stating that administrative authorities must provide clear and explicit reasons in support of their orders.- State of Orissa v. Dhaniram Luhar, asserting that reasons are indispensable for a sound judicial system.The Court concluded that the High Court's cryptic dismissal of the revision petition without recorded reasons was impermissible and prejudicial to the appellant.Conclusion:The Supreme Court set aside the High Court's order dated 29th February 2008 and remitted the case to the High Court for de novo hearing and passing of an appropriate order in accordance with law. The appeal was allowed to the extent of remitting the case, with no order as to costs.