---------- vs The Commissioner Of Commercial ...

on 8 September, 2008

Madras High Court ---------- vs The Commissioner Of Commercial ... on 8 September, 2008 Dated: 08 .09.2008 Coram: The Hon ble Mr.A.K.GANGULY, CHIEF JUSTICE and The Hon ble Mr.Justice F.M.IBRAHIM KALIFULLA Writ Appeals No.893 & 894 of 2008 and M.P.Nos.1 + 1 of 2008 ---------Tvl.SRC Projects Private Limited, Represented by its Chief Executive Officer, Thiru M.Paramasivam, 4-B, Lakshmipuram, Gandhi Road, Salem Appeals Vs. 1. The Commissioner of Commercial Taxes, 2nd Floor, Ezhilagam, Chepuak, Chennai 600 005. 636 007. Appellant in both the

2. The Commercial Tax Officer, Salem Town North Circle, Salem. Respondents in both

the appeals. Appeals filed under Clause 15 of the Letters Patent against the common order passed in W.P.Nos. 13184 & 13185 of 2008 dated 4.7.2008. For Appellant :::: Mr.D.Ibrahim Ali.
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---------- vs The Commissioner Of Commercial ... on 8 September, 2008

For Respondents :::: Mr.Haja Naziruddin, Special Govt.Pleader (Taxes) JUDGMENT THE HON BLE CHIEF JUSTICE Both these appeals arise out of a common judgment and order dated 04.07.2008 passed in two writ petitions viz., W.P.Nos.13184 and 13185 of 2008, whereby the learned Judge of the writ Court dismissed both the writ petitions, inter alia, on the ground that in a tax matter where alternative remedy is provided a writ petition should not be entertained since the writ petitions have been filed challenging an order of assessment. The learned Judge also held that disputed facts could not be gone into in a writ petition. These are the two broad grounds on which the writ petitions were dismissed. However, in the penultimate paragraph viz., paragraph 13 of the common judgment, the learned Judge held I am dismissing the writ petitions solely on the ground of availability of alternate remedy, merits of the cases canvassed by the learned counsel for the petitioner company and by the learned Additional Government Pleader are not considered and decided in this order, in any manner . 2. Certain relevant facts may be noted hereunder: The writ petitioner, who is the appellant herein, claims to be a private limited company and is doing heavy civil contract works like infrastructure road construction for National Highways Authority of India, and is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the said Act ). The petitioner is also doing certain quarry works. The accounts of the petitioner were called for by the 2nd respondent viz., The Commercial Tax officer, Salem Town North Circle, Salem for the assessment year 2003-2004. Pursuant thereto the petitioner produced the accounts and thereafter, the 2nd respondent issued a pre-assessment notice granting exemption towards the second sales of petrol and diesel, and labour charges incurred in the execution of works contract. Whereupon the 2nd respondent in his notice proposed to assess the petitioner s taxable turnover of Rs.7,55,39,983/-, and to that the petitioner filed his objection on 29.03.2007 inter alia contending that the proposed turn over of Rs.7,75,171/- cannot be brought to tax as no transfer of right is involved. The 2nd respondent has passed final assessment order on 23.04.2007 assessing the petitioner for a total taxable turnover of Rs.59,68,38,597/- and Rs.7,47,64,812/-. 3. The grievance of the petitioner is that the 2nd respondent issued a revised assessment notice dated 26.10.2007 proposing to levy tax on the purchase value machineries, thereby converting the entire purchase values as sales of machineries by adding a gross profit of 10%. The petitioner s contention is that he has not made any sales of the machineries and those machineries were utilized for business purposes and those machineries have not been sold, and the further contention of the petitioner is that the Assessing Officer proposed to levy tax on the purchase of materials which are used for maintenance works by the petitioner, and the petitioner s case is that there is no deemed sale of the machineries. Raising all these contentions, the petitioner made an elaborate objection to the 2nd respondent on 28.11.2007. But, the petitioner received the revision of assessment order dated 29.2.2008 from the 2nd respondent, which was received by the petitioner on 14.05.2008 raising demand without looking into the objection filed by the petitioner. The main grievance of the petitioner is that the objection raised before the Assessment Officer was not taken into consideration at all. 4. The contention of the petitioner is that in his representation dated 28.11.2007 he requested for an opportunity of personal hearing in terms of the circular issued by the Special Commissioner and Commissioner of Commercial Taxes, Chepauk, Chennai 5 dated 20.04.2001. In paragraph 9 of the representation dated 28.11.2007, filed by the petitioner, personal hearing was prayed for in the following terms: 9. Hence in the above stated circumstances we beg to submit that the above transaction will not fall
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---------- vs The Commissioner Of Commercial ... on 8 September, 2008

either under Section 3B or under Section 3A of the TNGST Act, 1959. Therefore, we humbly request you to accord an opportunity of personal hearing as per the Commissioner s Circular Acts Cell VI/13234/2001 dated 20.04.2001 as per Para 2 may be given to us to prove with necessary records that the proposed notice is not correct. 5. Admittedly, personal hearing was not given to the petitioner before the impugned order of assessment was passed. Before the learned Judge of the writ Court the stand of the revenue was that adequate opportunity of hearing was given inasmuch as the petitioner was given the opportunity to show cause and principles of natural justice are not violated. Therefore, instead of filing a writ petition, the petitioner should have appealed against the assessment order before the Appellate Assistant Commissioner under Section 31 of the said Act. Attention of the writ Court was also drawn to Section 31(3) of the said Act which authorizes the Appellate Assistant Commissioner to dispose of the appeal. 6. Some discussion also appears in the order under appeal on the question whether disputed questions of fact can be gone into by a writ Court. But, ultimately, the learned Judge after considering several judgments, dismissed the writ petitions inter alia on the sole ground of non-exhaustion of alternative remedy against the assessment order. 7. The said finding of the learned Judge is assailed before the appeal Court on various grounds which are summarized as under. (i)If the order of the Assessing Authority is violative of principles of natural justice, in such a situation, the bar of alternative remedy will not operate. (ii)The specific request of personal hearing in the representation of the appellant/petitioner dated 28.11.2007 was denied. Whether that amounts to a denial of natural justice in the facts and circumstances of the case. (iii) Whether the provisions of Section 16(1)(a) of the said Act which admittedly governs the field describing the procedure for assessment of the taxable turnover should be read with the Commission s circular dated 20.04.2001 (referred to in para 9 of the petitioner s representation) which casts an obligation on the assessing authority to give a personal hearing, when such a hearing is specifically asked for particularly taking into consideration the application of the principle of contemporanea exposito in the facts of the case. 8. In order to appreciate the aforesaid contentions, this Court proposes to set out the provision of Section 16(1)(a) of the said Act, which is relevant for our consideration. 6(1)(a): Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax, the assessing authority may, subject to the provisions of sub-section (2), at any time within a period of five years from the date of order of the final assessment by the assessing authority, determine to the best of its judgment the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary and after giving the dealer a reasonable opportunity to show cause against such assessment. 9. The relevant part of the circular dated 20.04.2001 (hereinafter, the said circular) is also set out below: . Fair opportunity is to be given to the assessee and judicial consideration given to the representations, evidences and materials furnished by him. But personal hearing need not be given unless the statute requires it (eg.Section22(2)) or the assessee asks for it. 10. Since, the questions overlap, all of them are discussed together. 11. Before dealing with those questions, this Court proposes to consider a few authorities on the content of the expression reasonable opportunity to show cause . It may be true if the provision of reasonable opportunity
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to show cause is considered bereft of the circular, then it may not be held that it includes an opportunity of personal hearing. But then in a case where the question involved is one of determination of certain factual disputes, which are a bit complex and not free from controversy, the Court has to consider whether principles of fairness would encompass personal hearing within the concept of reasonable opportunity to show cause under Section 16(1)(a) of the said Act. 12. Reference in this connection may be made to Professor Wade s treatise on Administrative Law (9th Edition). At page 517 of the said treatise the learned author has emphasized that a hearing will normally be an oral hearing . But, in some cases, it is sufficient to give an opportunity to make a representation in writing provided that no adverse materials are disclosed and further the demands of fairness are sufficiently met. 13. Similar views have been expressed in De.Smith s Judicial Review of Administrative Action, (6th Edition) at page 397. The learned author opined that a fair hearing does not necessarily mean that there must be an opportunity to be heard orally, but one is entitled to an oral hearing where fairness requires that there should be such hearing. But, fairness does not require that there should be an oral hearing in every case. However, the learned author referred to the decision in Sengupta Vs. Holms, (2002) EWCA Civ 1104 at (38) and quoted the views of Laws L.J. where the learned Judge held that central place is accorded to oral argument in our common law adversarial system . The learned Judge further said that ..this I think is important, because oral argument is perhaps the most powerful force there is, in our legal process, to promote a change of mind by the judge. That judges in fact change their minds under the influence of oral argument is not an arcane feature of the system; it is at the center of it (See pages 396 and 397 of the book). 14. In some of the judgments of the Hon ble Supreme Court similar views have been expressed. In State of Bombay v. Nurul Latif Khan reported in AIR 1966 SC 269, a Three-Judge Bench of the Hon ble Supreme Court, speaking through Chief Justice Gajendragadkar, was considering the ambit of Rule 55 of Civil Services (Classification, Control Appeal) Rules, 1930. The relevant clause in the rule provides an officer charge sheeted shall be required within a reasonable time to put in a written statement of his defence and state whether he desires to be heard in person. There is a further clause in the Rule, which lays down that if the charge sheeted officer so desires and the concerned authority so directs, an oral enquiry shall be held. Considering the said rule, the learned Judges held that if the charge sheeted officer desires, oral hearing is mandatory. The learned Judges held that this requirement is plainly based on considerations of natural justice and fair play (see para.13 at page 274). In this case also in the representation of the petitioner personal hearing was demanded in terms of the said Circular but the same was declined by the Revenue. 15. In the case of Travancore Rayons v. Union of India reported in AIR 1971 SC 862, which is a case under Central Excise and Salt Act, 1944, the question was whether the appellant company is entitled to a personal hearing in the revisional proceedings. Justice Shah, speaking for a Two-Judge Bench of the Hon ble Supreme Court, held that It is true that rules do not require that personal hearing shall be given, but, if in appropriate cases where complex and difficult questions requiring familiarity with technical questions are raised, personal hearing is given, it would conduce to better administration and more satisfactory disposal of the grievances of citizens . This view of the Supreme Court in 1971 is in accord with the views expressed in 2002 by Laws L.J. in Sengupta (supra). 16. In the case of Ram Chander v. Union of India reported in AIR 1986 SC 1173, the learned Judges of the Supreme Court held that though the expression appellate authority shall consider may not include an opportunity of hearing, but objective consideration is possible only if the delinquent servant is heard and given a chance to satisfy the Authority regarding the final orders that may be passed on his appeal. Considerations of fair play and justice also require that such a personal hearing should be given. 17. In State of U.P. Vs. Maharaja Dharmander Prasad Singh, AIR 1989 SC 997 in paragraph 29 at pages 1010 & 1011 of the report, the learned Judges held that where the grounds require determination of factual matters of some complexity the statutory authority should in the facts of the case have afforded a personal
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hearing to the lessee. 18. The principle of contemporanea exposito has been applied by the Supreme Court as a principle to expand and elucidate the meaning of statutory provision in National and Grindlays Bank Vs. Municipal Corporation for Greater Bombay, reported in AIR 1969 SC 1048. The Supreme Court has approved that the Court may resort to contemporaneous construction namely., construction which the authorities have put upon the law for the usage and conduct for longer period of time. The Court applied the said principle in construing the provision of Section 146(2) of the Bombay Municipal Corporation Act. In doing so, the Court referred to and relied upon an old English decision in the case of The Queen Vs. Commrs. of Inland Revenue, (1891) 1 QB 485. Reliance was placed by the Court on the judgment of Justice Stephen at page 489 of the report. In the instant case also the ambit of reasonable opportunity of showing cause under Section 16(1)(a) must be interpreted in line with the said Circular where it has been provided in a case where the assessee demands for oral hearing such oral hearing should be given. The said Circular has been issued by the Commissioner who has to administer the provisions of the said Act. 19. Subsequently also, in the case of R.S.Nayak Vs. A.R.Antulay, (1984) 2 SCC 183 a Constitution Bench of the Supreme Court has referred to the principle of contemporanea exposito. In construing the provision of Section 21 of the Indian Penal Code the Supreme Court applied the principle of contemporanea exposito and held that an M.L.A. is not a public servant. 20. The Hon ble Supreme Court in the case of Supreme Court Advocates-on-Record Association Vs. Union of India, (1993) 4 SCC 441 referred to the actual practice in the matter of interpretation of constitutional provisions in the appointment of superior Judges. The interpretation on the basis of the actual practice is the principle of contemporanea exposito (See pages 694 and 695 of the report). 21. In a matter dealing with the taxation, the Hon ble Supreme Court in the case of Union of India and another Vs. Azadi Bachao Andolan and another, reported in AIR 2004 SC 1107 has explained the principle of contemporanea exposito by quoting Crawford on Statutory Construction, 1940 Ed. In the said decision the following passage from Crawford has been quoted with approval. ..administrative construction (i.e., contemporaneous construction placed by administrative or executive officers) generally should be clearly wrong before it is overturned: such a construction commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive. 22. This Court, therefore, holds that the provision of Section 16(1)(a) of the said Act has to be construed in accordance with the said Circular which is by way of contemporanea exposito. So when a specific demand is made for personal hearing the reasonable opportunity of showing cause should include the same in the interest of fairness in procedure. 23. The finding of the learned single Judge that the writ petition cannot be entertained in view of the non-exhaustion of alternative remedy by the petitioner cannot be sustained in the facts of the case. 24. It is well settled that the existence of an alternative remedy does not oust the jurisdiction of a writ court under Article 226 of the Constitution. Such jurisdiction is plenary in nature. But the existence of alternative remedy operates as an automatic restrain on the discretion of the writ court in the exercise of its jurisdiction. But law in this aspect is well settled and there are well known exceptions where a writ petition is entertained despite non-exhaustion of statutory remedy. If any one of the exceptions exists, it is open to the writ court to exercise its jurisdiction. Those exceptions are if a writ petition has been filed for an enforcement of any fundamental right where there has been a violation of principles of natural justice at the instance of an inferior authority or where the proceedings are wholly without jurisdiction or ultra vires the statute under which such proceedings have been initiated (see Whirlpool Corporation v. Registrar of Trade Marks, 1998 (8) SCC page 1 at paragraphs 14 & 15, Pages 9 & 10 of the report), a writ petition can be entertained.
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25. In Whirlpool Corporation (supra), the learned Judges have considered the various judgments in coming to the aforesaid conclusion. In this connection, learned counsel for the appellant also cited a judgment of a Division Bench of this Court in the case of Sree Murugan Engineering Products v. Commercial Tax Officer, Coimbatore reported in 2006 (148) STC 419 (Mad). In paragraph-14 of the said judgment, the learned Chief Justice quoting the judgment of the Supreme Court in the case of State of H.P. v. Gujarat Ambuja Cement Limited reported in 2005 (142) STC 1 (SC), wherein the same principles have been reiterated, held that in a case where there is violation of principles of natural justice, alternative remedy will not be a bar. We respectfully concur with the views expressed in the said judgment. 26. Another judgment was also cited by the learned counsel for the appellant in the case of Jayam Traders v. Tamil Nadu Taxation Special Tribunal and others reported in 2004 (Vol.136) STC page 302 (Mad.). In this case also, the learned Judges held that though Section 28-A of the said Act does not in terms require a hearing to be given to a dealer who seeks the clarification, but in cases where dealer seeks for a personal hearing, such dealer should be afforded the same in all cases where the Commissioner proposes to record a finding, which is adverse to the dealer, and such adverse order to the assessee can only be made after giving the assessee a hearing. 27. We also hold, in the facts and circumstances of this case, the impugned order by way of revision of assessment should not have been passed without giving the assessee an opportunity of personal hearing. But since the same has been denied, the impugned order is hereby quashed. 28. We, therefore, allow the appeals and are constrained to hold that the learned Judge of the writ court was not correct in his conclusion in dismissing the writ petitions inter alia on the ground of non-exhaustion of alternative remedy in the facts and circumstances of the case discussed above. The judgment of the learned Judge is set aside. 29. We, therefore, direct that the appellant/petitioner must appear before the second respondent in these appeals, who passed the impugned order, within a period of seven days from the date of getting a certified copy of this judgment and thereupon, the second respondent will fix the personal date of hearing in which the appellant must appear and the hearing should be concluded within two weeks thereafter. After such hearing is concluded, the second respondent is at liberty to pass orders in accordance with law after considering the petitioner s case, which will be presented in the course of such hearing. 30. We also do not observe anything on the merits of the case of either the petitioner or the revenue. No costs. Consequently, miscellaneous petitions are closed. (A.K.G., C.J.) (F.M.I.K., J) 08.09.2008 Index: Yes / No Internet: Yes / No sm/pv Copy to: 1. The Commissioner of Commercial Taxes, 2nd Floor, Ezhilagam, Chepuak,
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Chennai

600 005.

2. The Commercial Tax Officer, Salem Town North Circle, Salem. The Hon ble Chief Justice and F.M.Ibrahim Kalifulla, J ----------------------------------sm/pv Pre-delivery Order in W.A.Nos.893 & 894 of 2008 Delivered on: 08 .09.2008

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