Tvl.SRC Projects Private Limited v. The Commissioner of Commercial Taxes

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 08.09.2008Coram:The Hon’ble Mr.A.K.GANGULY, CHIEF JUSTICEandThe Hon’ble Mr.Justice F.M.IBRAHIM KALIFULLAWrit Appeals No.893 & 894 of 2008andM.P.Nos.1 + 1 of 2008Tvl.SRC Projects Private Limited,Represented by its Chief Executive Officer,Thiru M.Paramasivam,4-B, Lakshmipuram, Gandhi Road,Salem – 636 007.… Appellant in both the AppealsVs.1. The Commissioner of Commercial Taxes, 2nd Floor, Ezhilagam, Chepuak, Chennai – 600 005.2. The Commercial Tax Officer, Salem Town North Circle, Salem.… Respondents in both the appeals.Appeals filed under Clause 15 of the Letters Patent against thecommon order passed in W.P.Nos. 13184 & 13185 of 2008 dated 4.7.2008.W.P.Nos.13184 and 13185/08petitions presented to this court to issue a writ ofcertiorarified Mandamus calling for the records relating to theassessment order passed by the 2nd respondent in hisTNGST/2661801/2003-2004 dated 26.2.08, received on 14.5.08 and quashthe same and to direct the second respondent to pass fresh order ofassessment by following circular of the 1st respondent dated 25.8.99and circular Acts cell VI/13234/2001 dated 20.4.01 by affording andopportunity of personal hearing before passing final order.For Appellant:::: Mr.Md.Ibrahim Ali.For Respondents:::: Mr.Haja Naziruddin, Special Govt.Pleader (Taxes) https://hcservices.ecourts.gov.in/hcservices/ J U D G M E N TTHE HON’BLE CHIEF JUSTICEBoth these appeals arise out of a common judgment and orderdated 04.07.2008 passed in two writ petitions viz., W.P.Nos.13184 and13185 of 2008, whereby the learned Judge of the writ Court dismissedboth the writ petitions, inter alia, on the ground that in a taxmatter where alternative remedy is provided a writ petition shouldnot be entertained since the writ petitions have been filedchallenging an order of assessment. The learned Judge also held thatdisputed facts could not be gone into in a writ petition. These arethe two broad grounds on which the writ petitions were dismissed.However, in the penultimate paragraph viz., paragraph – 13 of thecommon judgment, the learned Judge held “I am dismissing the writpetitions solely on the ground of availability of alternate remedy,merits of the cases canvassed by the learned counsel for thepetitioner company and by the learned Additional Government Pleaderare 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 aprivate limited company and is doing heavy civil contract works likeinfrastructure road construction for National Highways Authority ofIndia, and is a registered dealer under the Tamil Nadu General SalesTax Act, 1959 (hereinafter referred to as the “said Act”). Thepetitioner is also doing certain quarry works. The accounts of thepetitioner were called for by the 2nd respondent viz., The CommercialTax officer, Salem Town North Circle, Salem for the assessment year2003-2004. Pursuant thereto the petitioner produced the accounts andthereafter, the 2nd respondent issued a pre-assessment notice grantingexemption towards the second sales of petrol and diesel, and labourcharges incurred in the execution of works contract. Whereupon the 2ndrespondent in his notice proposed to assess the petitioner’s taxableturnover of Rs.7,55,39,983/-, and to that the petitioner filed hisobjection on 29.03.2007 inter alia contending that the proposed turnover of Rs.7,75,171/- cannot be brought to tax as no transfer ofright is involved. The 2nd respondent has passed final assessmentorder on 23.04.2007 assessing the petitioner for a total taxableturnover of Rs.59,68,38,597/- and Rs.7,47,64,812/-. 3. The grievance of the petitioner is that the 2nd respondentissued a revised assessment notice dated 26.10.2007 proposing to levytax on the purchase value machineries, thereby converting the entirepurchase values as sales of machineries by adding a gross profit of10%. The petitioner’s contention is that he has not made any sales ofthe machineries and those machineries were utilized for businesspurposes and those machineries have not been sold, and the furthercontention of the petitioner is that the Assessing Officer proposedto levy tax on the purchase of materials which are used formaintenance works by the petitioner, and the petitioner’s case isthat there is no deemed sale of the machineries. Raising all these https://hcservices.ecourts.gov.in/hcservices/ contentions, the petitioner made an elaborate objection to the 2ndrespondent on 28.11.2007. But, the petitioner received the revisionof assessment order dated 29.2.2008 from the 2nd respondent, which wasreceived by the petitioner on 14.05.2008 raising demand withoutlooking into the objection filed by the petitioner. The maingrievance of the petitioner is that the objection raised before theAssessment Officer was not taken into consideration at all. 4. The contention of the petitioner is that in hisrepresentation dated 28.11.2007 he requested for an opportunity ofpersonal hearing in terms of the circular issued by the SpecialCommissioner and Commissioner of Commercial Taxes, Chepauk, Chennai –5 dated 20.04.2001. In paragraph 9 of the representation dated28.11.2007, filed by the petitioner, personal hearing was prayed forin the following terms: “9. Hence in the above stated circumstances we beg tosubmit that the above transaction will not fall eitherunder Section 3B or under Section 3A of the TNGST Act,1959. Therefore, we humbly request you to accord anopportunity of personal hearing as per the Commissioner’sCircular Acts Cell VI/13234/2001 dated 20.04.2001 as perPara 2 may be given to us to prove with necessary recordsthat the proposed notice is not correct.” 5. Admittedly, personal hearing was not given to the petitionerbefore the impugned order of assessment was passed. Before thelearned Judge of the writ Court the stand of the revenue was thatadequate opportunity of hearing was given inasmuch as the petitionerwas given the opportunity to show cause and principles of naturaljustice are not violated. Therefore, instead of filing a writpetition, the petitioner should have appealed against the assessmentorder before the Appellate Assistant Commissioner under Section 31 ofthe said Act. Attention of the writ Court was also drawn to Section31(3) of the said Act which authorizes the Appellate AssistantCommissioner to dispose of the appeal. 6. Some discussion also appears in the order under appeal on thequestion whether disputed questions of fact can be gone into by awrit Court. But, ultimately, the learned Judge after consideringseveral judgments, dismissed the writ petitions inter alia on thesole ground of non-exhaustion of alternative remedy against theassessment order. 7. The said finding of the learned Judge is assailed before theappeal Court on various grounds which are summarized as under.(i)If the order of the Assessing Authority is violative ofprinciples of natural justice, in such a situation, the barof alternative remedy will not operate. (ii)The specific request of personal hearing in therepresentation of the appellant/petitioner dated 28.11.2007was denied. Whether that amounts to a denial of naturaljustice in the facts and circumstances of the case. https://hcservices.ecourts.gov.in/hcservices/ (iii) Whether the provisions of Section 16(1)(a) of the said Actwhich admittedly governs the field describing the procedurefor assessment of the taxable turnover should be read withthe Commission’s circular dated 20.04.2001 (referred to inpara 9 of the petitioner’s representation) which casts anobligation on the assessing authority to give a personalhearing, when such a hearing is specifically asked forparticularly taking into consideration the application ofthe principle of contemporanea exposito in the facts of thecase. 8. In order to appreciate the aforesaid contentions, this Courtproposes to set out the provision of Section 16(1)(a) of the saidAct, which is relevant for our consideration. “16(1)(a): Where, for any reason, the whole or anypart of the turnover of business of a dealer has escapedassessment to tax, the assessing authority may, subject tothe provisions of sub-section (2), at any time within aperiod of five years from the date of order of the finalassessment by the assessing authority, determine to thebest of its judgment the turnover which has escapedassessment and assess the tax payable on such turnoverafter making such enquiry as it may consider necessary andafter giving the dealer a reasonable opportunity to showcause against such assessment.” 9. The relevant part of the circular dated 20.04.2001(hereinafter, the said circular) is also set out below: “2. Fair opportunity is to be given to the assesseeand judicial consideration given to the representations,evidences and materials furnished by him. But personalhearing 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 discussedtogether. 11. Before dealing with those questions, this Court proposes toconsider a few authorities on the content of the expression‘reasonable opportunity to show cause’. It may be true if theprovision of reasonable opportunity to show cause is consideredbereft of the circular, then it may not be held that it includes anopportunity of personal hearing. But then in a case where thequestion involved is one of determination of certain factualdisputes, which are a bit complex and not free from controversy, theCourt has to consider whether principles of fairness would encompasspersonal hearing within the concept of “reasonable opportunity toshow cause” under Section 16(1)(a) of the said Act. https://hcservices.ecourts.gov.in/hcservices/

12. Reference in this connection may be made to Professor Wade’streatise on Administrative Law (9th Edition). At page 517 of the saidtreatise the learned author has emphasized that a “hearing willnormally be an oral hearing”. But, in some cases, it is sufficient togive an opportunity to make a representation in writing provided thatno adverse materials are disclosed and further the demands offairness are sufficiently met. 13. Similar views have been expressed in De.Smith’s JudicialReview of Administrative Action, (6th Edition) at page 397. Thelearned author opined that a fair hearing does not necessarily meanthat there must be an opportunity to be heard orally, but one isentitled to an oral hearing where fairness requires that there shouldbe such hearing. But, fairness does not require that there should bean oral hearing in every case. However, the learned author referredto 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 lawadversarial system”. The learned Judge further said that “……..this Ithink is important, because oral argument is perhaps the mostpowerful force there is, in our legal process, to promote a change ofmind by the judge. That judges in fact change their minds under theinfluence of oral argument is not an arcane feature of the system; itis at the center of it” (See pages 396 and 397 of the book). 14. In some of the judgments of the Hon’ble Supreme Courtsimilar views have been expressed. In State of Bombay v. Nurul LatifKhan reported in AIR 1966 SC 269, a Three-Judge Bench of the Hon’bleSupreme Court, speaking through Chief Justice Gajendragadkar, wasconsidering the ambit of Rule 55 of Civil Services (Classification,Control Appeal) Rules, 1930. The relevant clause in the rule providesan officer charge sheeted shall be required within a reasonable timeto put in a written statement of his defence and state whether hedesires 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 theconcerned authority so directs, an oral enquiry shall be held.Considering the said rule, the learned Judges held that if the chargesheeted officer desires, oral hearing is mandatory. The learnedJudges held that this requirement is plainly based on considerationsof natural justice and fair play (see para.13 at page 274). In thiscase also in the representation of the petitioner personal hearingwas demanded in terms of the said Circular but the same was declinedby the Revenue.15. In the case of Travancore Rayons v. Union of India reportedin AIR 1971 SC 862, which is a case under Central Excise and SaltAct, 1944, the question was whether the appellant company is entitledto a personal hearing in the revisional proceedings. Justice Shah,speaking for a Two-Judge Bench of the Hon’ble Supreme Court, heldthat “It is true that rules do not require that personal hearingshall be given, but, if in appropriate cases where complex anddifficult questions requiring familiarity with technical questions https://hcservices.ecourts.gov.in/hcservices/ are raised, personal hearing is given, it would conduce to betteradministration and more satisfactory disposal of the grievances ofcitizens”. This view of the Supreme Court in 1971 is in accord withthe views expressed in 2002 by Laws L.J. in Sengupta (supra).16. In the case of Ram Chander v. Union of India reported in AIR1986 SC 1173, the learned Judges of the Supreme Court held thatthough the expression “appellate authority shall consider” may notinclude an opportunity of hearing, but “objective consideration ispossible only if the delinquent servant is heard and given a chanceto satisfy the Authority regarding the final orders that may bepassed on his appeal. Considerations of fair play and justice alsorequire that such a personal hearing should be given.” 17. In State of U.P. Vs. Maharaja Dharmander Prasad Singh, AIR1989 SC 997 in paragraph 29 at pages 1010 & 1011 of the report, thelearned Judges held that where the grounds require determination offactual matters of some complexity the statutory authority should inthe facts of the case have afforded a personal hearing to the lessee. 18. The principle of contemporanea exposito has been applied bythe Supreme Court as a principle to expand and elucidate the meaningof statutory provision in National and Grindlays Bank Vs. MunicipalCorporation for Greater Bombay, reported in AIR 1969 SC 1048. TheSupreme Court has approved that the Court may resort tocontemporaneous construction namely., construction which theauthorities have put upon the law for the usage and conduct forlonger period of time. The Court applied the said principle inconstruing the provision of Section 146(2) of the Bombay MunicipalCorporation Act. In doing so, the Court referred to and relied uponan old English decision in the case of The Queen Vs. Commrs. ofInland Revenue, (1891) 1 QB 485. Reliance was placed by the Court onthe judgment of Justice Stephen at page 489 of the report. In theinstant case also the ambit of reasonable opportunity of showingcause under Section 16(1)(a) must be interpreted in line with thesaid Circular where it has been provided in a case where the assesseedemands for oral hearing such oral hearing should be given. The saidCircular has been issued by the Commissioner who has to administerthe 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 hasreferred to the principle of contemporanea exposito. In construingthe provision of Section 21 of the Indian Penal Code the SupremeCourt applied the principle of contemporanea exposito and held thatan M.L.A. is not a public servant. 20. The Hon’ble Supreme Court in the case of Supreme CourtAdvocates-on-Record Association Vs. Union of India, (1993) 4 SCC 441referred to the actual practice in the matter of interpretation ofconstitutional provisions in the appointment of superior Judges. Theinterpretation on the basis of the actual practice is the principleof contemporanea exposito (See pages 694 and 695 of the report). https://hcservices.ecourts.gov.in/hcservices/

21. In a matter dealing with the taxation, the Hon’ble SupremeCourt in the case of Union of India and another Vs. Azadi BachaoAndolan and another, reported in AIR 2004 SC 1107 has explained theprinciple of contemporanea exposito by quoting Crawford on StatutoryConstruction, 1940 Ed. In the said decision the following passagefrom Crawford has been quoted with approval. “……..administrative construction (i.e.,contemporaneous construction placed by administrative orexecutive officers) generally should be clearly wrongbefore it is overturned: such a construction commonlyreferred to as practical construction, although non-controlling, is nevertheless entitled to considerableweight, it is highly persuasive.” 22. This Court, therefore, holds that the provision of Section16(1)(a) of the said Act has to be construed in accordance with thesaid Circular which is by way of contemporanea exposito. So when aspecific demand is made for personal hearing the reasonableopportunity of showing cause should include the same in the interestof fairness in procedure. 23. The finding of the learned single Judge that the writpetition cannot be entertained in view of the non-exhaustion ofalternative remedy by the petitioner cannot be sustained in the factsof the case.24. It is well settled that the existence of an alternativeremedy does not oust the jurisdiction of a writ court under Article226 of the Constitution. Such jurisdiction is plenary in nature. Butthe existence of alternative remedy operates as an automatic restrainon the discretion of the writ court in the exercise of itsjurisdiction. But law in this aspect is well settled and there arewell known exceptions where a writ petition is entertained despitenon-exhaustion of statutory remedy. If any one of the exceptionsexists, it is open to the writ court to exercise its jurisdiction.Those exceptions are if a writ petition has been filed for anenforcement of any fundamental right where there has been a violationof principles of natural justice at the instance of an inferiorauthority or where the proceedings are wholly without jurisdiction orultra vires the statute under which such proceedings have beeninitiated (see Whirlpool Corporation v. Registrar of Trade Marks,1998 (8) SCC page 1 at paragraphs 14 & 15, Pages 9 & 10 of thereport), a writ petition can be entertained.25. In Whirlpool Corporation (supra), the learned Judges haveconsidered the various judgments in coming to the aforesaidconclusion. In this connection, learned counsel for the appellantalso cited a judgment of a Division Bench of this Court in the caseof Sree Murugan Engineering Products v. Commercial Tax Officer,Coimbatore reported in 2006 (148) STC 419 (Mad). In paragraph-14 of https://hcservices.ecourts.gov.in/hcservices/ the said judgment, the learned Chief Justice quoting the judgment ofthe Supreme Court in the case of State of H.P. v. Gujarat AmbujaCement Limited reported in 2005 (142) STC 1 (SC), wherein the sameprinciples have been reiterated, held that in a case where there isviolation of principles of natural justice, alternative remedy willnot be a bar. We respectfully concur with the views expressed in thesaid judgment. 26. Another judgment was also cited by the learned counsel forthe appellant in the case of Jayam Traders v. Tamil Nadu TaxationSpecial Tribunal and others reported in 2004 (Vol.136) STC page 302(Mad.). In this case also, the learned Judges held that thoughSection 28-A of the said Act does not in terms require a hearing tobe given to a dealer who seeks the clarification, but in cases wheredealer seeks for a personal hearing, such dealer should be affordedthe same in all cases where the Commissioner proposes to record afinding, which is adverse to the dealer, and such adverse order tothe 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 havebeen passed without giving the assessee an opportunity of personalhearing. But since the same has been denied, the impugned order ishereby quashed. 28. We, therefore, allow the appeals and are constrained to holdthat the learned Judge of the writ court was not correct in hisconclusion in dismissing the writ petitions inter alia on the groundof non-exhaustion of alternative remedy in the facts andcircumstances of the case discussed above. The judgment of thelearned Judge is set aside. 29. We, therefore, direct that the appellant/petitioner mustappear before the second respondent in these appeals, who passed theimpugned order, within a period of seven days from the date ofgetting a certified copy of this judgment and thereupon, the secondrespondent will fix the personal date of hearing in which theappellant must appear and the hearing should be concluded within twoweeks thereafter. After such hearing is concluded, the secondrespondent is at liberty to pass orders in accordance with law afterconsidering the petitioner’s case, which will be presented in thecourse of such hearing.30. We also do not observe anything on the merits of the case ofeither the petitioner or the revenue. No costs. Consequently,miscellaneous petitions are closed. sd/-Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ sm/pvCopy to:1. The Commissioner of Commercial Taxes, 2nd Floor, Ezhilagam, Chepuak, Chennai – 600 005.2. The Commercial Tax Officer, Salem Town North Circle, Salem.+1 cc To Mr.Md.Ibrahim Ali., Advocate, SR.509011 cc To The Government Pleader, SR.51002W.A.Nos.893 & 894 of 2008nm [co]gkg/18.9