At, High Court of Judicature at Calcutta
By, THE HONOURABLE MR. JUSTICE DEBIPROSAD PAL
For the Appearing Parties: G.S. Khettry, Panchanan Pal, S.N. Dutt, Advocates.
DEBIPROSAD PAL, J.
(1) THE petitioner carries on the business of buying and selling goods under the name and style of Messrs. Padamah Engineering Corporation of which he is the sole proprietor. He is a registered dealer under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the Bengal Act), as also under the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act). It is alleged that on or about 28th January, 1967, respondent No. 1 visited the place of business of the petitioner, searched the same, saw and signed delivery orders, chalans, etc. and reported in writing about a sister concern in the name of Messrs. Ridhkaran Surajmal, which is alleged to function from the same premises. Acting on the said written report, respondent No. 1 held, inter alia, that the dealer Messrs. Ridhkaran Surajmal effected inter-State sale on 16th July, 1966 and held the dealer, Messrs. Ridhkaran Surajmal, to be liable to pay tax from 16th July, 1966. By the said order dated 31st July, 1967, respondent No. 1 directed to issue form III from 16th July, 1966, to 31st December, 1966. By a notice dated 23rd August, 1967, issued under Section 9 of the Central Act read with Sections 11 and 14 (1) of the Bengal Act the petitioner was called upon to attend before respondent No. 1 on 29th September, 1967, with accounts and documents. In the said notice, it is alleged that respondent No. 1 was satisfied on information which had come into his possession that the petitioner had been liable to pay tax under the Central Act in respect of the period 16th July, 1966, to 31st December, 1966 and that the petitioner is alleged to have failed to get himself registered. The said notice was addressed to the petitioner carrying on the business under the trade name of Messrs. Ridhkaran Surajmal. Respondent No. 1 thereafter made an order on 4th October, 1967, whereby he assessed the petitioner for a sum of Rs. 5,000 under the Central Act on an estimated turnover of Rs. 50,000 for the same period. As there was no appearance on behalf of the petitioner, the order was made ex parte. It appears from the said order of assessment that respondent No. 1 had already determined the petitioner's liability to pay tax by his order dated 31st July, 1967 and as no return was filed by the deal
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r the turnover was arrived at on estimate. The petitioner thereafter preferred a revision under Section 9 of the Central Act read with Section 20 (3) of the Bengal Act before respondent No. 2, who by his order dated 20th January, 1968, confirmed the order of the Commercial Tax Officer dated 31st July, 1967. It appears from the order of respondent No. 2 that the petitioner was described as Messrs. Padamah Engineering Corporation. Thereafter, a notice dated 18th March, 1968, was issued under Section 9 of the Central Act read with Section 11 (4b) of the Bengal Act calling upon the petitioner to show cause why the penalty amounting to Rs. 2,000 would not be imposed for the alleged default in making the payment of tax. By an order dated 22nd April, 1968, respondent No. 1 imposed a penalty of Rs. 2,000 for the default in the payment of tax. An appeal was preferred against the said order imposing penalty and it is stated that the said appeal is still pending. On or about 12th August, 1968, a certificate under the Public Demands Recovery Act for a sum of Rs. 7,000 was filed in the office of the Certificate Officer for the default in the payment of tax of Rs. 5,000 and the penalty of Rs. 2,000 imposed under Section 11 (4b) of the Bengal Act. The petitioner has come up against the said certificate proceeding as also the order dated 31st July, 1967 and the orders dated 4th October, 1967 and 22nd April, 1968, made by respondent No. 1 and has obtained a rule nisi.(2) AN affidavit of Sri Nitindra Chandra Sen affirmed on 14th May, 1973, has been filed on behalf of the respondents. The matter came up for hearing on 11th April, 1973. An application for amendment was made by the petitioner for incorporating the ground that the order dated 31st July, 1967, was made by the respondents without giving any opportunity of hearing to the petitioner. On 15th May, 1973, I allowed the application for amendment and the petitioner was permitted to incorporate the amendment in the petition.(3) THE learned counsel for the petitioner has challenged the order dated 31st July, 1967, fixing the liability of the petitioner to pay tax under the Central Act from 16th July, 1966, firstly, on the ground that there is no such provision under the Central or Bengal Act for fixation of such liability except in a proceeding for assessment and, secondly, the said order has been made in violation of the principles of natural justice as the petitioner at no stage was given any opportunity of being heard before the said order was made. I asked the learned counsel for the respondents specifically the question as to the particular section under which the order dated 31st July, 1967, was passed by Sri T. K. Dutta, Commercial Tax Officer, fixing the liability to pay tax from 16th July, 1966. The learned counsel submitted that this order has been passed under Section 6 of the Central Act. It was further submitted that it is the practice of the sales tax department to pass such order under the aforesaid section in order to fix the particular date from which the dealer is held liable. It has also been submitted that the said order being in the nature of an administrative order does not require the petitioner to be given an opportunity of being heard before the making of such an order.(4) TO appreciate this contention it is necessary to examine some of the relevant provisions of the Bengal Act and the Central Act. Under the Central Act, the liability to pay tax on all sales effected by a dealer in the course of inter-State trade or commerce during any relevant year is fixed by Section 6, which is the charging section. The charge of tax created under Section 6 of the Act is to be calculated at the rates specified in Section 8 and such tax is to be levied and collected by the State referred to in Section 9 (1) in the manner laid down in Section 9 (2) and to be appropriated in the manner laid down in Section 9 (3) of the Central Act. Under the Bengal Act, the liability to pay tax is determined by Section 4 of the Act. Section 11 (1) and Section 11 (2) of the Bengal Act prescribe the procedure for the assessment of such liability which is fixed by the Bengal Act under Section 4. Section 11 (4) of the Bengal Act provides for the mode of recovery of the unpaid tax.(5) THE proposition is now well-settled since the statement of law by Lord Dunedin in Whitney v. Commissioners of Inland Revenue  A. C. 37, that there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what persons in respect of what properties are liable. Next, there is the assessment. Assessment particularises the exact sum which a person is liable to pay. Lastly comes the methods of recovery, if the person taxed does not voluntarily pay the sum assessed. The liability to pay sales tax does not depend upon an assessment, that ex hypothesi has already been fixed by the charging section. The subsequent provision as to assessment provides the machinery by which the liability may be quantified and when quantified to be enforced for the purpose of recovery : see Chatturam and Ors. v. Commissioner of Income-tax, Bihar  15 I. T. R. 302 (F. C.) and Tata Iron and Steel Co. v. State of Bihar  7 S. T. C. 158. The scheme of all sales tax legislations, including the statute with which we are dealing, is that the moment a dealer makes either purchases or sales which are subject to tax, the obligation to pay the tax arises and taxability is attracted although that liability cannot be enforced till the quantification is effected by assessment proceeding : Kedarnath Jute Manufacturing Co. v. Commissioner of Income-tax (Central), Calcutta  28 S. T. C. 672 (S. C.) and State of Madhya Pradesh and Ors. v. Shyama Charan Shukla  29 S. T. C. 215 (S. C.). Having regard to the scheme of the Act, the Commercial Tax Officer, in my view, has no power to fix or determine the liability to pay sales tax by making an order under Section 6 of the Central Act or under Section 4 of the Bengal Act. That liability is created and determined by the charging section and is independent of the assessment. When a dealer is so liable to pay tax by reason of the charging section he is under an obligation to furnish a return within the prescribed date and before the prescribed authority. If no returns are filed the dealer incurs the liability to be penalised. If the Commercial Tax Officer is not satisfied that the returns furnished by a dealer are correct and complete or that if no returns are furnished by a dealer within the prescribed date, a best judgment assessment can be made under Section 11 (1) of the Bengal Act. It is at this stage that the Commercial Tax Officer proceeds to make an assessment to the best of his judgment. If, on the other hand, a dealer does not furnish any return at all, the Commercial Tax Officer can make an assessment to the best of his judgment under Section 11 (2) of the Bengal Act after giving such dealer a reasonable opportunity of being heard. Section 9 (2) of the Central Act has adopted the procedural provisions prescribed under the general sales tax law of the appropriate State in respect of matters regarding assessment, collection and enforcement of the payment of tax including penalty. By virtue of the aforesaid Section 9 (2) of the Central Act, Section 11 of the Bengal Act is attracted for an assessment under the Central Act within the State of West Bengal. The Commercial Tax Officer while making an assessment under Section 9 (2) of the Central Act read with Section 11 of the Bengal Act is empowered to quantify the amount of tax due and payable by a dealer in respect of a particular period. Assessment in its wider sense comprehends the whole procedure for ascertaining and imposing liability upon the taxpayer. In ascertaining such liability, the period from which such liability arises is an important element which has to be determined. On the basis of such determination the quantification of the amount has to be made in accordance with the provisions of the law. There is no provision under the law which authorises the Commercial Tax Officer to fix and determine the liability to pay tax independent of and prior to an assessment which is made under the Act. Neither the Central Act nor the Bengal Act envisages a proceeding for determination of such liability which is ipso jure and ex hypothesi arises by reason of the charging section. It may be useful in this connection to refer to Rule 71 of the Bengal Sales Tax Rules framed under the Bengal Act which delegates the power conferred under the various sections of the Act to different authorities specified under the said rule. The power of assessment of tax or penalty and all other powers under Section 11 of the Act have been under the said rule delegated to the Commercial Tax Officer. In the said rule there is no reference to any such delegation of power under Section 4 of the Bengal Act. In fact, Section 4 of the Bengal Act (the corresponding provision being Section 6 of the Central Act) does not envisage the exercise of any power by any Commercial Tax Officer under the Act. That section being a charging section creates the liability to pay. Such liability, as already pointed out, does not depend upon any assessment. If Section 6 of the Central Act or Section 4 of the Bengal Act requires the making of any order or contemplates the exercise of any power under the aforesaid sections, there would have been a delegation of such power to the subordinate authorities as it has been provided for in the case of the making of an assessment under Section 11 of the Bengal Act. Having regard to the scheme of the Central Act as also the Bengal Act, respondent No. 1 had no such power for the determination of any such liability independently of any assessment proceeding. The order made by him on 31st July, 1967, fixing such liability is without any jurisdiction.(6) IT was next contended that even this order cannot be treated as one made by respondent No. 1 under Section 6 of the Central Act, it should be construed as an order made in the discharge of his administrative function. It is, therefore, submitted that an administrative order like the present one need not be passed after giving the petitioner an opportunity of being heard. It is difficult to accept this contention which has neither any merit nor attraction. It is now well-settled by the decision of the Supreme Court in the case of A. K. Kraipak and Ors. v. Union of India A. I. R. 1970 S. C. 150, that the dividing line between an administrative power and a quasi-judicial power is becoming thin and gradually evaporating. The Supreme Court pointed out that in recent years the concept of quasi-judicial power has been undergoing a radical change. Respondent No. 1 by his order dated 31st July, 1967, has determined (a) Messrs. Ridhkaran Surajmal of which the petitioner is the proprietor has effected inter-State sale on and from 16th July, 1966, (b) the petitioner as a dealer is liable to pay tax from 16th July, 1966. Pursuant to the said order, the assessment was made by respondent No. 1 on 4th October, 1967. The assessment was made ex parte as no return is alleged to have been filed by the dealer. In the said assessment, respondent No. 1 refers to his order dated 31st July, 1967 and records that the dealer's liability to pay tax has already been determined on 31st July, 1967. It appears, therefore, that the order dated 31st July, 1967, has determined the liability of the dealer to pay tax and also the date from which such liability is to arise. The said decision of respondent No. 1 was based upon a report which was prepared by the very officer who had made the order. In the context of these facts, one has to determine whether the proceeding which resulted in making the impugned order dated 31st July, 1967, is a quasi-judicial proceeding or an administrative proceeding.(7) THE growth and expansion of the functions of administration of a modern State have necessitated the development of the technique of administrative adjudication, which is intended to respond better to social needs and requirements because of the socio-economic changes which are taking place in modern times. The test as to whether a proceeding before an authority or a tribunal is a quasi-judicial proceeding has been laid down in the case of King v. Electricity Commissioners  1 K. B. 171, by Atkin Lord, J. , thus : "wherever any body of persons having legal authority to determine questions affecting the rights of subjects and having the duty to act judicially, act in excess of their legal authority they are subject to the controlling jurisdiction of the King's Bench Division exercised in these writs. " What, then is meant by "duty to act judicially" ? The idea was prevalent that the duty was to be defined exclusively in procedural terms; a body was under a duty to act judicially only if it was bound by statute to decide on evidence between a proposal and an opposition. Subsequent development of the law shows that prescribed forms of procedure are not necessary to make an enquiry judicial, provided in coming to the decision the well-recognised principles of approach are required to be followed. In other words, when the law under which the authority is making a decision, itself requires a judicial approach, the decision will be quasi-judicial: Province of Bombay v. Khusaldas S. Advani A. I. R. 1950 S. C. 222. The duty to act judicially may arise in widely different circumstances which it is neither possible nor desirable to attempt to define exhaustively. Such duty may arise even by implication from the effect of the exercise of a power upon the rights of individual, despite the absence of any express duty to follow a procedure analogous to the judicial. Even where the statute is silent as to the manner in which the power conferred should be exercised by the authority acting under it, the exercise of such power will depend upon the express provisions of the statute read along with the nature of the rights affected, the manner of disposal provided, the objective criterion if any to be adopted, the effect of the decision on the persons affected and similar other consideration : Board of High School and Intermediate Education, U. P. v. Ghanshyam Das Gupta A. I. R. 1962 S. C. 1110. The mere fact that the Act in question or a particular provision in a statute does not make it obligatory on the authority to call for an explanation and to hear the persons concerned, is not conclusive on the question as to whether such authority has to act as a quasi-judicial body when exercising its power under the statute : The Purtabpur Co. Ltd. v. Cane Commissioner of Bihar and Ors. A. I. R. 1970 S. C. 1896.(8) WHEN one has to consider whether the rules of natural justice are to be followed before an order is to be made which may affect the rights of a citizen and may involve civil consequences, such distinction between an administrative power and a quasi-judicial power is now gradually obliterated as a result of judicial decisions both in England and in our country. With the rapid growth of the socio-economic legislations of today and the consequent expansion of the function of the Government, the jurisdiction of the administrative bodies and governmental agencies is expanding. The concept of rule of law would lose its vitality if the instrumentalities of the State are not charged with the duties of discharging their functions in a fair and just manner. The requirement of acting judicially in a sense is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of a judicial power are merely those which facilitate, if not ensure a just and fair decision : A. K. Kraipak and Ors. v. Union of India A. I. R. 1970 S. C. 150. Where an administrative order requires an objective assessment of facts and affects the rights of citizens, if such order can be passed without complying with the elementary norms for arriving at a fair decision it may create "a new despotism", which may destroy the very concept of rule of law which forms the bed-rock of our constitutional set-up. What are considered an administrative power some years ago is now being considered by courts of law as a judicial power.(9) ON applying the various tests set out above there is hardly any doubt that even if respondent No. 1 has any such power to determine the liability of the petitioner to pay tax independent of his power to make an assessment, the proceedings which have resulted in the order dated 31st July, 1967, is a quasi-judicial proceeding. He determined the petitioner's liability to pay tax and also the time from which such liability is to arise. Such a determination affecting the civil rights of a citizen is based on an objective assessment of facts and cannot be considered to be a purely administrative act, but requires a judicial approach for arriving at such a decision. An assessment involves : (i) the determination of the period for which the liability has arisen; (ii) the quantification of such liability in accordance with the provisions of the Act.(10) IF proceedings for assessment have been held to be a judicial and/ or quasi-judicial proceeding, the determination of the liability in respect of a particular period is a step or a part of the proceedings for assessment. The proceedings for such a determination are by their very nature quasi-judicial in character. Even if the order is considered to be an administrative order as it involves civil consequences, such order cannot be made without complying with the rules of natural justice. Counsel for the respondents frankly admitted that before such an order was passed the petitioner was not given any opportunity of being heard. He, however, referred to the report dated 28th January, 1967, made by Sri T. K. Dutta, who was also the officer who made the order on 31st July, 1967. It appears that the place of business of Messrs. Padamah Engineering Corporation at Nalini Seth Road was visited by Sri T. K. Dutta and towards the end of the said report it appears that the dealer was asked to submit returns. From the said report it appears that Sri T. K. Dutta visited the place of the petitioner, but after the said report was prepared by him, the petitioner was not given any opportunity of being heard before the determination of his liability by the order dated 31st July, 1967. Even while making the assessment on 4th October, 1967, the Commercial Tax Officer relied upon his order dated 31st July, 1967 and did not examine the question as to the petitioner's liability. He simply relied upon his order dated 31st July, 1967 and on the basis of such determination of the petitioner's liability, an assessment was made. This order dated 31st July, 1967, therefore, affected the petitioner adversely and, in my view, is in violation of the principles of natural justice as no opportunity of being heard was given to the petitioner before making such order. The order of the Assistant Commissioner of Commercial Taxes made in revision under Section 20 (3) of the Bengal Act read with Section 9 of the Central Act is also liable to be quashed as the petitioner's grievance of denial of opportunity was not considered by him although such a point was specifically taken in the revision application.(11) THE assessment was made by the Commercial Tax Officer on 4th October, 1967, ex parte as there was no appearance on behalf of the petitioner. But the said assessment was based upon the determination of the liability to pay tax by the order dated 31st July, 1967. No separate argument was advanced in support of the order of assessment. As the order of assessment was based upon the decision arrived at on 31st July, 1967 and as the said order dated 31st July, 1967, is liable to be set aside, the assessment order also is to be quashed.(12) IN the result, the orders dated 31st July, 1967 and 4th October, 1967, made by the Commercial Tax Officer and the order dated 10th January, 1968, made by the Assistant Commissioner of Commercial Taxes are quashed by a writ of certiorari. As the assessment is set aside, the certificate proceedings are also liable to be quashed. There will be a writ in the nature of mandamus commanding the respondents to forbear from giving effect to the said orders and the certificate issued under the Public Demands Recovery Act. The rule is made absolute to the extent indicated above. The respondents will be at liberty to proceed with the assessment in accordance with law. There will be no order as to costs.
"1973 (32) STC 601"