* THE HON’BLE SRI ANIL R. DAVE, THE CHIEF JUSTICE AND *HON’BLE MR JUSTICE RAMESH RANGANATHAN + TREVC Nos.45 and 62 of 2009 and W.P.No.7189 of 2009 W.P.No.7189 of 2009 % Dated 30-04-2009 # M/s. Gudimetla Venkata Reddy Tadipalligudem, West Godavari District, Rep. by its Proprietor Sri G. Venkata Reddy …. Petitioner Vs. $. 1 Commercial Tax Officer, Tadepalligudem and another …. Respondents ! Counsel for the petitioner: Sri S.Krishna Murthy ^ Counsel for the Respondents : Sri K.Raji Reddy, Special S.C. for Commercial Tax <GIST: > HEAD NOTE: ? Cases referred [1] (1968) 21 STC 383 2 (1990) 11 APSTJ 278 3 (1989) 75 STC 434 4 (1984) 57 STC 35 (All.) 5 (1999) 9 SCC 268 6 (1977) 2 SCC 256 7 1986 Supp SCC 617 8 (1984) 1 SCC 43 9 AIR 1968 SC 850 10 AIR 1972 SC 32 11(1997) 1 SCC 444 12AIR 2006 SC 3542 13AIR 1996 SC 1669 14AIR 1970 SC 679 15AIR 1966 SC 671 16 (1996) 4 SCC 69 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE THIRTIETH DAY OF APRIL TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI ANIL R. DAVE, THE CHIEF JUSTICE and THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO : 7189 of 2009 Between: M/s. Gudimetla Venkata Reddy Tadipalligudem, West Godavari District, Rep. by its Proprietor Sri G. Venkata Reddy ..... PETITIONER AND 1 Commercial Tax Officer, Tadepalligudem 2 Deputy Commissioner (CT) Eluru 3 Joint Commissioner (CT)(Legal) Hyderabad. 4 The Manager, The Infrastructure & Projects Limited (IVRCL) D.No. 8-2-350/5/A/24/1B, Road NO.2, Banjara Hills, Hyderabad. .....RESPONDENT(S) 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 a writ or order or direction partiuclarly one in the nature of writ of Mandamus granting stay of collection of the disputed tax of Rs. 8,40,162/- for the assessment year 1999-2000 (APGST) arising in pursuance of the appeal order of the Sales Tax Appellate Tribunal in T.A.No. 704/2005 dt. 12-12-2008 read with the revision order passed by the second respondent dt. 31-1-2005 pending disposal of the Tax Revision Case filed before this Hon'ble Court or to pass Counsel for the Petitioner:MR.S.KRISHNA MURTHY Counsel for the Respondent No.: GP FOR COMMERCIAL TAX The Court made the following : THE HON’BLE SRI ANIL R. DAVE, THE CHIEF JUSTICE AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN TREVC Nos. 45 and 62 of 2009 and Writ Petition No. 7189 OF 2009 Common Order: (per Hon’ble Sri Justice Ramesh Ranganathan) Aggrieved by the order of the Sales Tax Appellate Tribunal, Visakhapatnam, in T.A No.704 of 2005 dated 12.12.2008, TREVC No.62 of 2009 is filed. Seeking stay of collection of the disputed tax of Rs.8,40,162/-, for the assessment year 1999-2000 (APGST), pending disposal of TREVC No.62 of 2009, W.P. No.7189 of 2009 is filed. Against the order of the Sales Tax Appellate Tribunal, Visakhapatnam, in T.A No.703 of 2005 dated 12.12.2008, TREVC No.45 of 2009 is filed. As the questions raised in TREVC No. 45 and 62 of 2009 are identical, it would suffice if the facts in TREVC No.45 of 2009 are noted. The petitioner, a contractor engaged in the execution of works contract, is an assessee on the rolls of the Commercial Tax Officer, Tadepalligudem. He was assessed to tax under the A.P.G.S.T. Act for the assessment year 1998-99 and his net turnover was determined as Rs.33,79,460/-. The Deputy Commissioner (Commercial Tax), Eluru Division, by his proceedings dated 31.01.2005, revised the assessment and determined the net turnover as Rs.83,17,570/-. Aggrieved thereby, the petitioner preferred an appeal to the Sales Tax Appellate Tribunal in T.A No.703 of 2005. Before the Tribunal, the petitioner herein contended that, while the pre-revision show cause notice was issued by the predecessor Deputy Commissioner on 15.11.2001, the final order was passed by the successor Deputy Commissioner on 31.01.2005, that the certificate issued by the Executive Engineer for Rs.75,02,429/- relating to earth work was ignored and that the Deputy Commissioner had determined the turnover under Rule 6(3)(ii) of the APGST Rules, 1957 in respect of the executed works. The petitioner relied on M/s. Swastik Oil Mills Limited v. H.B. Munshi, Deputy Commissioenr of Sales Taxes, Bombay[1] to contend that the suo motu revision was based on mere conjectures, with no ground for invoking the revisional powers, and was, therefore, liable to be quashed. He also contended that he had lost his books of accounts for the years 1998-99 and 1999-2000, that he had intimated the police and that a paper advertisement was also given in this regard. However, by order dated 12.12.2008, the Tribunal dismissed T.A.No.703 of 2005. Sri S. Krishna Murthy, learned counsel for the petitioner, would submit that belated finalisation of the revision proceedings by a successor Deputy Commissioner, 3 ½ years after a show cause notice was issued by the predecessor Deputy Commissioner, more so without affording an oral hearing to the petitioner, was illegal and in violation of principles of natural justice. Learned counsel would contend that, as the law is required to be certain and no assessee could have the Damocles sword hanging over his head for an inordinate length of time, the revisional order of the Deputy Commissioner was liable to be set aside. Learned counsel would rely on an order of the Full Bench of the Tribunal in M/s. Itikala Rachaiah Setty and Sons, Kurnool v. State of A.P.[2], wherein the judgment of the Allahabad High Court in Kailash Chand Pirthi Singh v. Commissioner of Sales Tax, UP[3] was followed. According to the learned counsel, since the successor Deputy Commissioner had not issued the show cause notice, principles of natural justice required that he should issue a notice afresh, receive the objections and give an oral hearing to the petitioner and, thereafter, pass final orders in accordance with law. On the exemptions being disallowed by the revisional authority applying Rule 6(3)(ii) of the APGST Rules, learned counsel would contend that the Tribunal had failed to note that the assessing authority had initially issued a notice proposing deductions as per Rule 6(3)(ii) but in the final order he had revised the deduction based on the statements duly certified by the Executive Engineer and had allowed deductions as per the accounts, that Rule 6(3)(ii) was applicable only when the component of material and labour were not ascertainable from the accounts, that, in the present case, the accounts contained the element of labour and material and, therefore, the Tribunal had grossly erred in adopting the said rule for limiting the value of labour and material. According to the learned counsel, the petitioner had specifically contended, in the grounds of appeal before the Tribunal, that the books of accounts were lost and had stated that a police complaint and a public advertisement in the newspaper was given, that, in any case, the books were lost subsequent to finalisation of assessment by the assessing authority and that it did not effect the assessment/revision, since the corroborative evidence had been obtained and finalized. Sri K. Raji Reddy, learned Special Standing Counsel for Commercial Taxes, would submit that even in the objections filed by the petitioner, before the Deputy Commissioner dated 10.10.2001 (which was received on 14.12.2001), no reference was made regarding the loss of the books of accounts, that the petitioner’s contention that no further notice had been issued after the revision show cause notice dated 31.10.2001 was incorrect as the petitioner was called upon, vide final notices dated 23.10.2002 and 14.07.2004, to produce the books of accounts, that, in the reply submitted on 26.11.2002, the petitioner had requested that, as he was unwell, he be granted one month’s time to produce the records and that there was no whisper in the said letter regarding loss of the books of accounts. Learned counsel would draw attention of this Court to the grounds of appeal filed before the Tribunal wherein the petitioner had stated that their books of accounts, for the years 1998-99 and 1999-2000, were lost while coming from the office of the Commercial Tax Officer, Tadepalligudem and the said fact was intimated to the police and also a paper advertisement had been given in this regard, whereas, in the present revision filed before this Court, he had taken a contrary stand that the books of accounts were lost while coming from the office of the Auditor. Learned Standing counsel would submit that, even in the endorsement of the Sub-Inspector of Police, Tadepalligudem Town PS dated 18.01.2002, filed for the first time in the TREVC, the complaint filed by the petitioner was that one Sri Nagireddy was taking the gunny bundle containing 40 account books on 05.10.2001 from the Auditor Ramachandramurthy and, while coming to his owner’s house on his cycle, he had lost the gunny bag containing the accounts books. Learned Standing counsel would draw attention of this Court to the paper advertisement allegedly issued by the petitioner wherein also a reference is made only to the books having been lost while returning from the Auditor’s office. According to the Learned Standing Counsel, the very fact that no such contention had been raised in the objections filed to the show cause notice issued by the Deputy Commissioner would show that this plea of loss of the books of accounts was an after thought and, since the petitioner had failed to produce the books of accounts, the Deputy Commissioner had rightly held that it was Rule 6(3)(ii) which was required to be applied. Learned Standing counsel would submit that there was no statutory provision which prohibited a successor Deputy Commissioner from passing orders on a show cause notice issued by his predecessor, and that the rules of natural justice could not be expanded to such an extent as to infer any such obligation. Learned Standing counsel would submit that no question of law arose for consideration and that TREVCs were liable to be dismissed. Learned counsel would point out that the relief sought for in the writ petition is for stay of collection of the disputed tax pending disposal of the TREVCs and, as the TREVCs themselves necessitated dismissal, the writ petition was also liable to be dismissed in limine. Under Sub-section (2) of Section 20 of the APGST Act, the Additional Commissioner/ Joint Commissioner/Deputy Commissioner have been conferred the suo motu power to revise any order passed by a subordinate authority, if such order or proceeding is prejudicial to the interests of revenue. The proceedings for revision, if started suo motu, must not be based on mere conjectures. Interference must be on sufficient grounds and, if it is considered necessary that some additional enquiry should be made to arrive at a proper and just decision, there can be no bar to the revising authority holding a further enquiry or directing such an enquiry to be held by some other appropriate authority, and to admit additional material. (Swastik Oil Mills Ltd.1). The Deputy Commissioner (CT) exercised the power of revision on the ground that the Commercial Tax Officer had incorrectly allowed the exemption on certain turnover of the petitioner without verifying the books of accounts, other material and corroborative evidence. The order of the Commercial Tax Officer dated 18.06.2001 does not disclose examination by him of the books of accounts of the petitioner - assessee. Under Rule 6(3)(ii) of the APGST Rules, 1957, in cases where the value of the goods, involved in the execution of a works contract, are not ascertainable from the accounts of a dealer, the turnover of the dealer shall be determined after deducting the amount, calculated at the percentages prescribed thereunder for different types of contracts, from the amounts paid or payable to the dealer for carrying out such a contract. Where the books of accounts of an assessee are not available for examination it is only Rule 6(3)(ii), and not Rule 6(2), which would apply. The Deputy Commissioner, in his order dated 31.01.2005, has recorded a finding that, in reply to the show cause notice the dealer had merely filed his objections without producing the material record, that, despite a notice being issued on 28.10.2002, the petitioner did not produce the books of accounts, that a final notice dated 14.07.2004 was again issued calling upon him to produce the books of accounts, agreements entered into with the contractors, work orders etc., and, though the petitioner received the notice on 19.10.2004, he did not produce the books of accounts. In the counter affidavit, a tabular statement of the notices sent is furnished which shows that, in his reply to some of the notices, the petitioner had merely requested time for production of the books of accounts but had failed to produce them for verification. It is not even the case of the petitioner, as is evident from the present TREVCs, that he had produced the books of accounts before the Commercial Tax Officer. All that is stated is that, though the assessing authority proposed to apply Rule 6(3)(ii) of the APGST Rules, he had given up the said Rule when the petitioner had filed his objections together with the particulars of the works as certified by the Executive Engineer (PR) and that, in his final order, the assessing authority had revised the deduction based on the statement duly certified by the department. It is beyond dispute that the books of accounts were neither produced before the assessing authority nor the revisional authority. In its order dated 12.12.2008, the Tribunal noted that the Commercial Tax Officer had allowed exemption on a turnover of Rs.46,13,360/- towards earth work, on a turnover of Rs.28,89,150/- towards labour charges in Kovvur Division, and on a turnover of Rs.10,00,270/- in respect of the construction works/civil works @ 35% of the total contract receipts for such works on the basis of the particulars of the works given by the Executive Engineer, that the Commercial Tax Officer had allowed the exemption without verifying the books of accounts or any other material and corroborative evidence, that this was found fault with by the Deputy Commissioner while withdrawing the said exemptions, that no evidence was adduced in support of the contention that the petitioner’s books of accounts were lost while coming from the office of the Commercial Tax Officer, Tadepalligudem, that these assertions were bald and vague, that not even the dates of losing the records, the date of the police complaint and the date of the paper advertisement were mentioned by the petitioner, that neither the final assessment order of the Commercial Tax Officer nor the revision order of the Deputy Commissioner made any mention regarding loss of the books of accounts and other evidence, that such non-recording was not assailed by the petitioner in the grounds of appeal in Form-II, that the Commercial Tax officer had not even stated that the Executive Engineer had certified that any of the three contracts executed by the petitioner were pure earth works and it was only stated that, from the information given by the Executive Engineer, the turnovers had been finally determined by him. The Tribunal concluded that it was unable to convince itself that the Commercial Tax Officer was right in giving such exemptions in the final assessment order. The Tribunal noted that the Commercial Tax Officer had allowed exemption of 35% on the total receipts received from the contractee towards certain construction works which were not specifically mentioned in Rule 6(3)(ii) of the APGST Rules, 1957 and hence the construction/civil works were to be considered under the residuary clause i.e., Clause F covering “All other contracts” in respect of which only 30% of the total receipts were assigned towards the labour component of the works and that the Commercial Tax Officer had erred in allowing exemption of 35%. Section 22 of the APGST Act empowers a dealer to prefer a revision to the High Court against the order of the Tribunal, on the ground that the Tribunal had either decided erroneously, or had failed to decide, any question of law. The question whether the books of accounts were, in fact, produced before the Commercial Tax Officer or the Deputy Commissioner is one of fact and not of law, and since the Tribunal, as the final fact finding authority, has recorded that they were not, such finding does not necessitate interference by the High Court in revision proceedings. (Kailash Chand Pirthi Singh3; Commissioner, Sales Tax v. Nand Mohan Madan Mohan[4]). As rightly pointed out by Sri K. Raji Reddy, learned Special Standing Counsel for Commercial Taxes, the petitioner has taken different stands regarding loss of the books of accounts. While the petitioner contended before the Tribunal that the books were lost while they were coming from the office of the Commercial Tax Office, in the revision proceedings before this Court he contends that the books were lost while coming back from the Auditor’s office. Viewed from any angle, the contention of Sri S. Krishna Murthy, learned counsel for the petitioner, that application of Rule 6(3)(ii) by the revisional authority is illegal, necessitates rejection. On the question of the subsequent Deputy Commissioner passing an order based on the show cause notice issued by the previous Deputy Commissioner, the Tribunal observed that no authority was shown to them that the successor Deputy Commissioner could not pass a revision order on the basis of the pre-revision show cause notice issued by his predecessor, that it was not the petitioner’s case that the predecessor Deputy Commissioner had personally heard him and, without considering those arguments advanced by him before the predecessor Deputy Commissioner, the successor Deputy Commissioner had passed final orders, that the views of the predecessor Deputy Commissioner were very much available in the pre-revision show cause notice, that the objections of the petitioner, in respect of those proposals, were also available in writing before the successor Deputy Commissioner and, on the basis of these documents, a decision was taken by the successor Deputy Commissioner in the impugned order and that, from the detailed impugned revision orders, the Tribunal was unable to persuade itself to hold that it was passed mechanically and without application of mind. The mere fact that the revisional order was passed 3 ½ years after the show cause notice was issued is of little consequence. It is not even the case of the petitioner that the revisional order dated 31.1.2005 is barred by limitation. It is evident from the order of the Deputy Commissioner that the delay in passing the final order was due to numerous opportunities being given to the petitioner to produce his books of accounts. The petitioner, having failed to produce the books of accounts despite several opportunities being given to him, cannot now be heard to say that the revisional order should be dismissed for latches. No statutory provision prohibiting a successor deputy commissioner from passing final orders of revision on the basis of a show cause notice issued by his predecessor in office, has been brought to our notice. It is not even the case of the petitioner that either the Act or the Rules mandate a personal hearing being given to the dealer by the revisional authority. It is also not his case that he had sought for such an opportunity or that the Deputy Commissioner, who had issued the show cause notice proposing to revise the assessment order passed by the Commercial Tax officer, had heard him personally. It is well settled that in cases where no request is made for personal hearing, the final order passed cannot be held to be vitiated on that account. (State Bank of India v. Luther Kondhpan[5]) In the absence of any statutory mandate, the question which necessitates examination is whether the requirement of an oral hearing forms part of the rules of natural justice. 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 the administrative realities and other factors of a given case, can be exasperating. No man shall be hit below the belt — that is the conscience of the matter. (Chairman, Board of Mining Examination and Chief Inspector of Mines v. Ramjee[6]). Rules of natural justice are not rigid rules, they are flexible and their application depends upon the setting and the background of the statutory provision, nature of the right which may be affected and the consequences which may entail, its application depends upon the facts and circumstances of each case. These principles do not apply to all cases and situations. (R.S. Dass v. Union of India[7]). Whether any particular principle of natural justice would be applicable to a particular situation and whether there has been any infraction of the application of that principle, has to be judged, in the light of the facts and circumstances of each particular case. The basic requirement is that there must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the relevance of the material and reasons. (K.L. Tripathi v. State Bank of India[8]). The application of natural justice depends upon the nature of the jurisdiction conferred on the authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in a particular case. (K.L.Tripathi8, Union of India v P.K. Roay[9], Channabasappa Basappa Happali v. State of Mysore[10]). The requirements of natural justice should be moulded in such a way as to take care of the two basic facets of this principle: (1) to make known the nature of accusation; and (2) to give opportunity to state the case. (Shiv Sagar Tiwari v. Union of India[11]). To sustain the allegation of violation of principles of natural justice one must establish that prejudice has been caused to him by non-observance of the principles of natural justice (Syndicate Bank vs. Venkatesh Gururao Kurati[12]; and State Bank of Patiala vs. S. K. Sharma[13]). All that the Courts have to see is whether non-observance of any of these principles in a given case is likely to have resulted in deflecting the course of justice. (State of U.P. vs. Om Prakash Gupta[14]). The opportunity of being heard need not, necessarily, be by personal hearing. It can be by written representation. Whether the said opportunity should be by written representation or by personal hearing depends upon the facts of each case and, ordinarily, it is in the discretion of the Tribunal. (M.P. Industries Limited v. Union of India[15]). Courts cannot insist that, under all circumstances, personal hearing has to be afforded to the person concerned. If this principle of affording personal hearing is extended whenever statutory authorities are vested with the power to exercise discretion, it would lead to chaotic conditions. The requirement of principles of natural justice, of affording an opportunity to be heard before an adverse order is passed, is complied with by affording an opportunity to the person concerned to present his case before such quasi-judicial authority who is expected to apply his judicial mind to the issues involved. An order passed, after taking into consideration the points raised, shall not be held to be invalid merely on the ground that no personal hearing had been afforded. This is all the more important in the context of taxation and revenue matters (Union of India v. Jesus Sales Corporation[16]). Reliance placed by the petitioner on the order of the Full Bench of the Tribunal, in M/s. Itikala Rachaiah Setty2, is misplaced for the order of the Tribunal, even if it be that of a Full Bench, is not a precedent binding on the High Court. Neither is there a statutory mandate nor do rules of natural justice require an oral hearing