Can't Examine Officials Of Tax Dept. On Enquiry Report Based On F-Forms Submitted By Dealer: Andhra Pradesh High Court

The Andhra Pradesh High Court has held that the assessee or petitioner does not have a right to cross-examine the officials of the Tax Department of Bombay on the F-Forms submitted by the dealer.

The bench of Justice Ravi Nath Tilhari and Justice Harinath Nunepally has observed that the tax proceedings are of a quasi-judicial nature. The tax authorities are bound to comply with the principles of natural justice, though they are not strictly bound by the rules of evidence. The rule that requires an opportunity to be heard to be given to the person likely to be affected by a decision is, however, not an inflexible rule with a fixed connotation. It has a variable content depending on the nature of the inquiry, the framework of the law under which it is held, the constitution of the authority holding the inquiry, the nature and character of the rights affected, and the consequences flowing from the decision.

F-Form is filed by dealers who transport goods from one state to another (transfer of stock). Thus, those dealers who have interstate transportation of goods should be registered under the CST Act, and the dealer should file an F Form on a monthly basis for the goods transported by him from one state to another.

The petitioner/assessee is a registered company on the rolls of the Commercial Tax Officer, Tadepalligudem, and a dealer in vegetable oil, deoiled cake, etc. During the years 1991–92, the petitioner sent consignments of vegetable oils outside the state and sales through non-resident agents.

The assessing authority, the Commercial Tax Officer (CTO), granted an exemption on a turnover of Rs. 1,64,15,660. The Deputy Commissioner (Commercial Tax), in his revised order, has brought a turnover of Rs. 1,52,12,755 to tax as inter-state sales. The assessee or petitioner filed a tribunal appeal, which has been dismissed by the appellate tribunal.

The Deputy Commissioner (CT) observed that the Commercial Tax Officer examined the books of accounts of the dealers, and a show cause notice was issued allowing exemption on the turnover in addition to other exemptions based on sale patties and F-forms filed by the dealer. The Commercial Tax Officer subsequently issued another show cause notice proposing the withdrawal of exemptions on turnover. In view of the verification of transactions and inquiries conducted by the Commercial Tax Officer with the assistance of the Sales Tax officials at Bombay, which revealed that 5 agents were non-existent and fictitious, and the forms issued by those agents to the petitioner-dealer were not issued by the Sales Tax officials at Bombay and were not certified forms by the concerned Sales Tax officials at Bombay, consequently, the sale patties and other relevant records filed by the petitioner-dealer in support of the consignment sale could not be accepted as correct and valid. The inquiries also revealed that the agents had not paid any sales tax in their state to the concerned sales tax officials on the sales affected in respect of book transactions.

The Appellate Tribunal observed that when the officers of the government have issued a statement or sent an inquiry report on the basis of the records available, the question of cross-examining the officers would not arise.

The assessee contended that the opportunity of cross-examination was not given to the petitioner, and consequently, the impugned order suffers from a violation of the principles of natural justice by not affording the petitioner the opportunity to hear. For the opportunity of cross-examination, the report of the Commercial Tax Department, Bombay, could not be relied upon. Cross-examination is a facet of the principles of natural justice. If the report was not relied upon, there was no other material to support the finding recorded against the petitioner.

The issue raised was whether the report of the Commercial Tax Department in Bombay could be relied upon without affording the petitioner an opportunity to cross-examine the officers of the Commercial Tax Department in Bombay.

The court stated that the Tax Officer, though not debarred from relying on any material against the assessee, justice and fair play demand that the source of information relied upon by the Tax Officer be disclosed to the assessee so that he may be in a position to rebut the same, and an opportunity should be given to the assessee to meet the effect of the said information. If the statutory provision provides for the right of cross-examination, or such a right directly or even by necessary implication flows from the opportunity of hearing, depending upon the nature of the inquiry, the nature and character of the rights affected, and the consequences flowing from the decision, the right of cross-examination cannot be denied.

The court held that the procedure followed was just, fair, and in consonance with the principles of natural justice. No opportunity of cross-examination for the petitioner was required to be given. It has not resulted in a violation of the principles of natural justice so as to interfere with the order under challenge.

Counsel For Petitioner: P. Karthik Ramana

Counsel For Respondent: T. C. D. Sekhar

Case Title: M/s. Foods, Fats and Fertilizers Limited Versus The State of Andhra Pradesh

Case No.: Tax Revision Case No. 245 Of 2003

Click Here To Read The Order