SEPTEMBER 29, 2014

By Rengaraj K, Advocate, Swamy Associates

IN a significant order, the Hon'ble High Court of Madras has ruled that it is not fair on the part of the Assistant Commissioner to attach the properties of the assessee as it will affect the very existence of his business. If the attachment is in force, it is not possible for the assessee to run the industry. In the recent judgment reported in 2014-TIOL-1108-HC-MAD-VAT in the case of M/s PVS TEXTILES (P) LTD Vs THE ASST COMMISSIONER OF (CT) (FAC), COIMBATORE the Hon'ble Madras High Court while allowing the Writ Petition, directed the Assistant Commissioner to raise the attachment on condition that the assessee pays 10% of the tax amount in respect of each of the assessment years within a period of two weeks from the date of receipt of a copy of this order.

The assessee is a manufacturer, exporter and supplier of textiles and classified as Indian Non-Government Company. The Assistant Commissioner had levied tax on the assessee in 2012. The assessee did not prefer any appeal against such order. Therefore, distraint order was passed by the Assistant Commissioner attaching the property of the assessee. The assessee, therefore, had filed this petition submitting that this order of attachment was in violation of principles of justice as the assessee was not given any opportunity to be heard and also the exemption claimed by him was denied and higher tax was levied on the assessee.

The Assistant Commissioner has passed an order of attachment, without affording an opportunity to the petitioner, which is in violation of principles of natural justice. According to the petitioner, the respondent disallowed the claim of exemption with regard to certain transactions and levied higher tax during the Year 2012. Against which, the petitioner has not preferred any appeal. Therefore, distraint orders have been passed by the respondent attaching the property of the petitioner.

Attaching the personal property of the assessee is per se illegal and unsustainable and in violation of the principles of natural justice. The High Court of Madras has rightly held that it is not fair on the part of the assessing authority to attach personal property without affording an opportunity to put forth his defence. Gleeson CJ has said that it is important to look to the practical effect of any alleged denial of an opportunity to be heard because "fairness is not an abstract concept. It is worth noting briefly that a further aspect of the natural justice which is provided for under the legislative regime which will not be canvassed in this discussion is the right of parties to have their case heard by an unbiased adjudicator. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice."

Principles of Natural justice: "rule against bias".

IN the recent past the assessing authorities under the TNVAT Act, are passing non-speaking orders and also passing distraint orders without any rhyme or reason and finally justice is recognised only at the High Court level. The principles of natural justice have their roots in two Latin maxims: "Audi alterampartem" and "nemojudex in causasua". The first maxim means that a reasonable opportunity of hearing which is sine qua non and imperative for the statutory authority to afford before passing the order or decision and the second maxim means that no one should be a judge in their own cause. It is a principle of natural justice that no person can judge a case in which they have an interest. The rule is very strictly applied to any appearance of a possible bias, even if there is actually none:

Under Tamil Nadu VAT Act, Section 22 (4) provides that before taking action under this sub section, the dealer shall be given reasonable opportunity of being heard. And in Section 25(2) it is stated, provided that before making and enhancement of tax payable the assessing authority shall, give a reasonable opportunity to the dealer to show cause against such enhancement and make such enquiry as it may consider necessary. Situations of violation of principles of natural justice in taxation laws: 

The following situations warrant the assessees to seek the intervention and direction of the High Courts.

++ When Notice itself is not served.

++ When arbitrary orders are passed by the department without granting opportunity of personal hearing.

++ When relied upon documents or copies of seized documents are not provided by the department despite request letter submitted by the assessee.

++ When cross examination is denied.

++ When the written submission for the Notice or for Personal Hearing is not considered.

++ When the request of modification stay application is not considered.

++ When fundamental rights of the petitioner guaranteed under articles 14 & 21 of the Constitution of India are not protected.

++ When reasonable time for reply or for adjournment is denied without notice.

++ When the order is passed for new additional demand without issuing revised notice.

++ And among other reasons, when speaking order is not passed.

In Ashok Kumar Yadav Vs State of Haryana (1985 SCR Supl (1) 657) the Apex Court held - It is one of the fundamental principles of jurisprudence that no man can be a judge in his own cause and that if there is a reasonable likelihood of bias it is in accordance with natural justice and common sense that the justice likely to be so biased should be incapacitated from sitting.

Before parting... The basic principle underlying this rule is that justice must not only be done but must also appear to be done and this rule has received wide recognition in several decisions of the Supreme Court. It is high time that the lower authorities and the Assessing authorities appreciate the statutory provisions before passing the orders to avoid an assessee from knocking the door of the High Court for relief.