2025 (10) TMI 1126 - HC - VAT / Sales Tax

Quashed impugned order for failure to consider second appeal grounds, violating audi alteram partem and rule against bias

Vithlani Exports Versus State Of Gujarat & Ors.

HC allowed the petition and quashed and set aside the Tribunal's impugned order dated 29.01.2025 in Misc. Application No. 37/2024. The court found the ... Principles of natural justice - non dealing of the issues raised by the petitioner in the Second Appeal by the Tribunal - mistake of fact is apparent from the record or not - HELD THAT:- It is not in dispute that the grounds raised by the petitioner in Second Appeal are not considered by the Tribunal. It is a fundamental proposition of law that the other side should be heard and all the issues should be considered before any order is passed. The maxim of Audi Alteram Partem is broad enough to include the rule against bias since a fair hearing is must for it to be unbiased hearing. In the instant case, the fact is not in dispute that the grounds raised by the petitioner were not considered before passing the impugned order. The impugned judgment and order dated 2901.2025 passed by the Tribunal in Misc. Application No. 37 of 2024 is not tenable and the same is required to be quashed and set-aside. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal's refusal to rectify or entertain a rectification application (Misc. Application) on the ground that the Second Appeal was a decision on merits (and hence appealable) is sustainable where it is shown that specific grounds raised in the Second Appeal were not considered by the Tribunal. 2. Whether non-consideration of specific grounds (notably non-service of statutory notice in Form 6B and illegality of levy of penalty under Section 34(1)/34(12) of the VAT Act read with Section 9(2) of the CST Act) by the Tribunal amounts to violation of the audi alteram partem principle and warrants quashing and remand. 3. What relief is appropriate where a statutory appellate forum has decided an appeal without adjudicating pleaded and pressed grounds of appeal-rectification, restoration of appeal file, or remand for fresh consideration? ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of Tribunal's refusal to rectify on the ground that the Second Appeal was a decision on merits Legal framework: The Tribunal's power to rectify or entertain a misc. application is governed by the statutory scheme under the VAT Act (Sections 73, 78, 79(1), 79(2) invoked in submissions) and by ordinary principles enabling correction of orders where mistakes apparent on the face of the record or where issues raised were not considered. Precedent Treatment: The judgment does not rely on or cite specific binding precedents; it invokes the general principle that a remedy is available where a tribunal fails to consider pleaded grounds, and that mere characterization of an order as an appealable order does not cure non-consideration of issues. Interpretation and reasoning: The Court examined the Tribunal's order rejecting the rectification application which rested on the premise that the Second Appeal was decided on merits and therefore the Tribunal could not rectify. The Court found on the record that several specific grounds raised in the Second Appeal and reiterated in the Misc. Application (including non-service of statutory notice in Form 6B and challenge to penalty) were not dealt with in the Second Appeal order. The Tribunal's characterization that the appeal was decided on merits was therefore inaccurate as the Tribunal had omitted adjudication on those grounds. Ratio vs. Obiter: Ratio - where a tribunal refuses rectification on the basis that the appeal was decided on merits but the record demonstrates that pleaded and pressed grounds were not considered, such refusal is not sustainable. Obiter - none material beyond the direct holding. Conclusions: The Tribunal's refusal to entertain rectification on that premise was unsustainable; the impugned order must be quashed insofar as it declined to address the omitted grounds. Issue 2 - Non-consideration of specific grounds and the audi alteram partem principle Legal framework: Fundamental principle of natural justice - audi alteram partem - requires that parties be heard and that all issues raised and pressed before an adjudicatory forum be considered. Procedural fairness extends to statutory tribunals deciding appeals under the VAT/CST scheme. Precedent Treatment: The Court applied the established maxim audi alteram partem as the governing principle; no contrary precedent was relied upon or distinguished. Interpretation and reasoning: The Court identified on the record that the petitioner had specifically raised (a) non-service of the mandatory statutory notice in Form 6B and lack of 15 days' time, and (b) challenge to levy of penalty under Sections 34(7)/34(12) (as read) - these contents were part of the written submissions and the Misc. Application. The Tribunal's Second Appeal order did not adjudicate these matters. The Court held that failing to consider these grounds before passing an order breaches the duty to hear and address the arguments of the parties; such omission demonstrates that the hearing was not in substance a fair and unbiased adjudication. The Court accepted the respondents' concession that those grounds were not considered. Ratio vs. Obiter: Ratio - omission to consider pleaded grounds in an appeal amounts to denial of fair hearing and vitiates the Tribunal's order; such order must be set aside and the matter remanded for fresh consideration. Obiter - references to the broader rule against bias insofar as it flows from audi alteram partem. Conclusions: Non-consideration of the aforesaid grounds violated audi alteram partem and warranted quashing of the Tribunal's Misc. Application order and restoration of the Second Appeal for fresh decision after considering all grounds. Issue 3 - Appropriate remedy where appellate forum omitted adjudication of pleaded grounds Legal framework: Where an adjudicatory body has omitted to decide pleaded issues, the appropriate remedies include quashing the defective order and remanding the matter for fresh adjudication after affording opportunity to be heard; rectification is permissible where mistake is apparent or where a ground was not considered but can be remedied by revisiting the matter consistent with procedure. Precedent Treatment: The Court applied established remedial principles of administrative and appellate law without citation to specific authorities. Interpretation and reasoning: Given the undisputed omission and the respondents' acceptance that the grounds were not considered, the Court concluded that rectification/refresher adjudication was required. The Court determined that the impugned Misc. Application order dated 29.01.2025 was not tenable; it quashed that order, directed restoration of the Second Appeal to the Tribunal's file, and remanded the matter to the Tribunal to consider all grounds raised by the petitioner and to pass a fresh order after following due procedure of law. A specific timeframe of twelve weeks from receipt of the order was fixed for completion of that exercise. No costs were ordered. Ratio vs. Obiter: Ratio - where a tribunal fails to adjudicate pleaded grounds, the correct remedy is to quash the defective order and remit the matter for fresh consideration expeditiously; restoration of the appeal file and a directive to decide all grounds after following due procedure is appropriate. Obiter - the Court's fixation of a twelve-week timeline is remedial directive rather than legal principle. Conclusions: The appropriate relief is quashing of the impugned Misc. Application order, restoration of the Second Appeal to the Tribunal file, and remand for fresh adjudication on all grounds within a specified period (12 weeks), with no order as to costs.