IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE SIXTEENTH DAY OF SEPTEMBER TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI JUSTICE GODA RAGHURAM and THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO : 7193 of 2009 Between: M/s. Saraiwalla Agro Refineries Ltd. Mankal Village, Maheshwaram Mandal, Ranga Reddy District, Rep by its Managing Director Mr. Ravindra Kumar Gupta ..... PETITIONER AND The Deputy Commissioner (CT), Saroornagar Division, Hyderabad. .....RESPONDENT Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to to issue an appropriate writ, order or direction, more particularly one in the nature of Writ of Mandamus to issue an appropriate writ, order or direction, more particularly one in the nature of Writ of Mandamus, declaring the order of the Deputy Commissioner (CT) Saroornagar Division, Hyderabad, in TIN NO. 28240128000, dt. 12-3-2008, as illegal, arbitrary and set aside the same and pass Counsel for the Petitioner:MR.S.CHAKRAPANI Counsel for the Respondent No.: GP FOR COMMERCIAL TAX The Court made the following : Form-NIC-OGS/WP{RLD} THE HON'BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.7193 of 2009 ORDER: (Per THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN) This writ petition is filed to declare the order of assessment passed by the respondent, in TIN No.2824028000 dated 12.3.2009, as arbitrary and illegal. The petitioner, a company registered under the Companies Act, 1956, is engaged in the manufacture and sale of oil by refining crude oil. The respondent issued show cause notice dated 29.7.2008 alleging, inter alia, that the petitioner did not disclose purchases of oil in their stock registers though the said purchases were from local dealers, that, as the corresponding sales were not reflected in the said months, it was liable to be treated as escaped turnover, that the estimated turnover in this regard was Rs.16.99 Crores and the tax thereon was Rs.67,98,065/-. The show-cause notice also alleged that the petitioner had produced way bills numbering 132 and 11 under the A.P.VAT Act and CST Act respectively as against 241 and 35 books issued by the Department, that the turnover relatable to unproduced way bill books was proposed to be determined at Rs.248,52,00,000/- and Rs.54,72,00,000/-, with a corresponding tax liability of Rs.9,94,08,000/- and Rs.5,47,20,000/- under the A.P. VAT Act and the CST Act respectively. The petitioner was also alleged to have purchased crude oil in excess of its installed capacity by 9955.811 metric tonnes and to have sold this excess crude oil. The sales turnover of crude oil was estimated as Rs.47,78,78,928/- and the tax thereon at Rs.1,91,15,157/-. The petitioner had, allegedly, obtained CST waybills for purchase of crude oil and to have failed to give details though the department had called for production of the duplicate and triplicate copies of the way bills along with L.R. copies. The petitioner filed its objections on 1.10.2008 and 3.11.2008 denying these allegations. With regards the first allegation, they contended that, in the absence of details relating to unaccounted purchases being furnished to them, they were not in a position to explain as to whether such transactions were accounted for or not and, without indicating these details, the proposed addition of turnover, on an estimate basis, was unwarranted, unjust and in violation of principles of natural justice. With regards non-production of way bills, the petitioner contended that, apart from the opening balance of five way bill books, they had actually taken 242 way bill books under the AP VAT Act, they had initially produced 132 books and had later produced 115 books to the Commercial Tax Department. With regards way bills issued under the CST Act, the petitioner contended that they had produced all the 37 books either before or along with their explanation. They requested that the proposed turnover on this allegation be dropped. With regards estimated turnover of excess crude issues, the petitioner contended that they were unaware of the basis on which the alleged excess issue of crude oil, to a tune of 9955.81 metric tonnes, was arrived at as there was no mention of the basis in the show cause notice. They contended that, as against their installed capacity of 82,500 metric tonnes, the crude oil actually given for conversion was only 55,287 metric tonnes and that this allegation was unsustainable. The respondent passed an order of assessment on 12.3.2009 estimating the turnover, on purchases not accounted for, at Rs.16.99 Crores. He levied tax thereon at Rs.67,98,065/-. With regards non- production of way bills, the respondent estimated the turnover at Rs.7,34,16,000/- holding that, in respect of 161 way bills, details of the material transported was not incorporated in the triplicate portion of the way bills. He levied tax thereon at Rs.29,36,640/-. The petitioner would contend that the details given in the assessment order did not form part of the show cause notice issued earlier resulting in their being denied the opportunity of putting forward their defence during the course of pre-assessment enquiry. On the turnover relating to crude oil excess issues, the respondent made an addition of Rs.47,78,78,928/- holding that the excess issues of crude oil must have been sold. He levied tax thereon at Rs.1,91,15,157/-. The petitioner would contend that, while the impugned order of assessment gives a detailed breakup of the excess processed crude oil of 9955.811 metric tonnes, neither were these details furnished to the petitioner at any time before the assessment order was passed nor was the basis, on which the excess process on different dates arrived at, disclosed to the petitioner earlier. The petitioner would further contend that, in addition thereto, the assessment order levied tax of Rs.35,51,590/- on a turnover of Rs.8,87,89,775/- which was not even referred to in the show cause notice issued earlier. While several contentions are urged, in challenge to the validity of the assessment order, by Sri S.R.Ashok Learned Senior Counsel appearing on behalf of the petitioner, the main grievance is that the respondent did not indicate the substratum of the charges/material particulars in the show cause notice dated 29.7.2008 on any of the aspects and, consequently, they were denied an opportunity of putting forward their defence in relation to the proposed assessment. In the counter affidavit filed by the respondent, it is stated that the petitioner maintained two stock registers, one manual and the other one computerized, that, in response to the notice, the petitioner initially produced the manually maintained stock registers, that, on verification of the purchase registers in the presence of the representative of the petitioner, the respondent noticed that certain purchases affected by them, during the period 1.4.2005 to 27.5.2008, were not reflected in the stock registers, that the petitioner had neither given proper explanation for non maintenance of the stock registers for the said period nor had they filed the computerized stock registers and, hence, the sale value of Rs.16,99,51,652/- was estimated on the basis of the total purchases shown in the purchase registers and its corresponding finished product i.e, refined oil. It is further stated that, on issuance of the show cause notice on 29.7.2008, the petitioner produced both the computerized and the manual stock register and that they were rejected on the ground that the registers were not genuine and were self-serving. The respondent would submit that, if the petitioner had maintained their books correctly, the registers could well have been produced at the first instance itself. With regards way bills it is stated that, on scrutiny, it was found that 161 triplicate copies of way bills were kept blank for which there was no proper explanation and, therefore, the respondent had levied tax thereon at Rs.9,94,08,000/-. It is also stated that, during the personal hearing held on 27.2.2009, the petitioner had filed details of the sales made and the goods transported on the way bills, that they had also produced copies of the original way bills, that, while issuing way bills for any transaction, the dealer has to prepare them in triplicate by using carbons, that the petitioner had failed to give valid reasons for keeping the third copy of the way bills blank and, therefore, tax was levied thereon at Rs.29,36,640/-. With regards conversion of crude oil and refined oil, the respondent would state that they had gone through the balance sheet of the company which showed that, as against their installed capacity of 82,500 metric tonnes, they had processed in excess thereof for 9,955.811 metric tonnes, that this excess quantity was treated as sale of crude oil, that, on verification of the records, it was found that they had produced crude oil every day during the year even on national holidays and festival days, and the respondent had, therefore, levied tax thereupon at Rs.1,91,15,157/-. According to the respondent, the petitioner was given ample opportunity to produce evidence in support of their claim but they had not availed the opportunity, that, for the years 2002-03, 2003-04 and 2004-05 also, the petitioner had suppressed turnovers and had evaded tax legitimately due to the revenue, that the assessment orders for the said years were revised, that the suppressed turnover was assessed to tax at Rs.68,60,879/- and, as the petitioner had accepted the said orders, they had attained the finality. It is evident from the assessment order dated 12.3.2009, that it contains particulars which did not form part of the show cause notice issued earlier. The impugned order of assessment contains details of 161 way bills whose triplicate copy was said to have been kept blank. The assessment order also contains details of the way bill numbers and the value thereof. None of these details are reflected in the show cause notice. Similarly, on the issue of conversion of excess crude oil, the impugned order of assessment contains details of the day-wise excess processed crude though these details are also not reflected in the show cause notice. A person should not be deprived of his vested right, or be made to suffer any disadvantage or detriment, without telling him why such an action was warranted and without giving him an opportunity to say why it should not be taken. The requirement of audi alteram partem has two elements—notice of what action is proposed, why it is proposed, and adequate opportunity to show that the action is uncalled for. A corollary of the audi alteram partem rule, namely “qui aliquid statuerit, parte inaudita altera acquum licet dixerit, haud acquum fecerit” is that “he who shall decide anything without the other side having been heard, although he may have said what is right, will not have done what is right” or in other words, as is now expressed, “justice should not only be done but should manifestly be seen to be done”. The notice must be precise and unambiguous. It should apprise the party determinatively of the case he has to meet. (Canara Bank vs. Debasis Das[1]; Canara Bank vs. V.K.Awasthy[2]). The person proceeded against must know that he is required to meet the allegations which might lead to a certain action being taken against him. (S.L.Kapoor vs. Jagmohan[3]). A proper hearing must always include a ‘fair opportunity to those who are parties to the controversy for correcting or contradicting anything prejudicial to their view’.([4]) A crucial aspect of a fair hearing is having a right to know the grounds or the opposing case in advance.([5]) If prejudicial allegations are made against a person he must, normally, be given particulars of them. He must also be enabled to controvert, correct or comment on other evidence or information that may be relevant to the decision.([6]) It is essential to state the particulars to enable the person to answer the case against him. A notice which does not mention the particulars, on which the case against the person is based, cannot provide a foundation for the proceedings that follow. (Nasir Ahmad vs. Asstt. Custodian General, Evacuee Property[7]). As the show cause notice, which preceded the impugned assessment order, makes no mention of the details given in the order of assessment, the petitioner-assessee has been denied the opportunity of effectively showing cause why such turnover was not liable to tax under the A.P. VAT Act. The show cause notice, in the present case, violates the audi alteram partem rule. This question can be examined from another angle also. It is only if the proposed turnover is liable to tax under the A.P.VAT Act, would the respondent have jurisdiction to pass the assessment order levying tax under the A.P. VAT Act. The fact or facts upon which the jurisdiction of an authority depends is a “jurisdictional fact” the existence of which is the sine qua non, or condition precedent, to the assumption of jurisdiction by the authority. Once such a jurisdictional fact is found to exist, the authority has the power to decide adjudicatory facts or facts in issue. (Carona Ltd. vs. Parvathy Swaminathan & Sons[8]; Halsbury’s Laws of England (4th Edn.), Vol.1, Para 55, p.61; Reissue, Vol.1(1), Para 68, pp.114-15; Chaube Jagdish Prasad vs. Ganga Prasad Chaturvedi[9], Arun Kumar vs. Union of India[10]). The show cause notice should reflect the jurisdictional facts based on which the final order is proposed to be passed. The assessee would then have an opportunity to show cause that the authority had erroneously assumed existence of a jurisdictional fact and, since the essential jurisdictional facts do not exist, the authority does not have jurisdiction to decide the other issues. This requirement is also absent in the show cause notice issued in the present case. Viewed from any angle failure to indicate the basis for levy of tax, under the A.P. VAT Act, has resulted in the show cause notice falling foul of the audi alteram partem rule necessitating the impugned order of assessment being set aside for violation of principles of natural justice. It is well settled that existence of an alternative remedy is not a bar for exercise of jurisdiction under Article 226 of the Constitution of India and that, in situations where there has been violation of principles of natural justice or where the order is wholly without jurisdiction, the High Court would not, ordinarily, relegate the parties to the alternative remedy available under the Statute. (Whirlpool Corpn. vs. Registrar of Trade Marks[11]; Popcorn Entertainment vs. City Industrial Development Corporation[12]). It must also be borne in mind that, if natural justice is violated at the first stage, the right of appeal is not so much a true right as a corrected initial hearing. As a general rule, failure of natural justice in the original body cannot be cured by a sufficiency of natural justice in an appellate body. There is a manifest need to avoid treating an appeal as an overall substitute for the original proceeding. (Wade’s Administrative Law, 5th Edn., Institute of Chartered Accountants of India vs. L.K. Ratna[13]). The impugned order of assessment is, accordingly, quashed. It is open to the respondent to issue a detailed show cause notice afresh to the petitioner. Sri S.R.Ashok, Learned Senior Counsel appearing on behalf of the petitioner, would submit that, within two weeks from the date of receipt of the show cause notice, the petitioner would furnish their reply/objections thereto without seeking any further time. On receipt of the petitioner’s reply, it is open to the respondent to pass an order of assessment afresh, if need be, after giving the petitioner an opportunity of oral hearing. The writ petition is allowed. However, in the circumstances, without costs. _____________________ GODA RAGHURAM,J Date:16-9-2009 __________________________ RAMESH RANGANATHAN,J ASP [1] (2003) 4 SCC 557 [2] (2005) 6 SCC 321 [3] (1980) 4 SCC 379 [4] ADMINISTRATIVE LAW : NINTH EDITION : H.W.R. WADE & C.F.FORSYTH [5] ADMINISTRATIVE LAW : 4TH EDITION : PETER LEYLAND & TERRY WOODS [6] Judicial Review Of Administrative Action : 5TH EDN : DE DMITH, WOOLF & JOWELL [7] AIR 1980 SC 1157 = (1980) 3 SCC 1 [8] (2007) 8 SCC 559 [9] AIR 1959 SC 492 [10] (2007) 1 SCC 732 [11] (1998) 8 SCC 1 [12] (2007) 9 SCC 593 [13] (1986) 4 SCC 537