Unreasoned Orders By Judicial/ Quasi-Judicial Authorities Violate Natural Justice: Rajasthan High Court Quashes Commercial Tax Assessment Order

The Rajasthan High Court has set aside an assessment order passed by the Commissioner, Commercial Taxes Department, Jaipur (“CCT”) under the Rajasthan Value Added Tax Act, 2003. The Court observed that the assessment order was unreasoned and was passed without any application of mind, violating the principles of natural justice.

The assessee had filed his returns for the assessment year 2014-15 claiming input tax credit (“ITC”). However, the demand for ITC was turned down by CCT by passing an assessment order against which the assessee had filed a writ petition before the Court. It was argued by the counsel for the assessee that the assessment order passed by CCT, disallowing the claimed ITC, was merely a system generated order passed without any application of mind. It was further argued that no reasons were provided to disallow the ITC claimed by the assessee. As opposed to this, the counsel for the respondent raised a preliminary objection regarding the jurisdiction of the Court in light of an alternative remedy of appeal available under the Act. It was further argued that the assessee had failed to substantiate the ITC claim by responding to the issued notices and producing books of accounts. The counsel further stated that the reasons to disallowing the ITC claim were given as a reply to the writ petition.

After listening to contentions of both the sides, division bench led by Justice Avneesh Jhingan decided to deal with the objection of alternative remedy and referred to the Supreme Court case of Whirlpool Corporation v Registrar of Trade Marks. The case had carved out an exception for allowing writ petition irrespective of availability of an alternative remedy. It had ruled that normally, existence of an effective and efficacious remedy barred the jurisdiction of the high court under Article 226. However, it had been settled by the Supreme Court that in certain contingencies, this bar could be relaxed. Violation of principles of natural justice was recognized as one such contingency that allowed waiving of this bar. In furtherance to this, the Court also highlighted the Supreme Court case of M/s Kranti Associates Pvt. Ltd. and another v Sh. Masood Ahmed Khan and others. The case put forth the requirement of recording reasons for every judicial/quasi-judicial order. The case stated that reasoning was the soul of justice and the exercise of recording reasons for orders upheld principles of judicial accountability, transparency, rule of law, constitutional governance, due process etc.

Based on this analysis, the Court highlighted that the assessment order was a computer generated one. It had no basic background context regarding issuance of notice, non-compliance or even the reasons for disallowing the claim for ITC. Such order was seen as violative of principles of natural justice, allowing the high court to exercise its writ jurisdiction even if alternative remedy was available. Accordingly, the writ petition was allowed by the Court while setting aside the assessment order by CCT that had turned down the ITC claim of the assessee.

Title: M/s Napin Impex Pvt. Ltd. v Commissioner, Commercial Taxes Department, Kar Bhawan, Ambedkar Circle, Janpath, Jaipur

Citation: 2024 LiveLaw (Raj) 117

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