1. The petitioner, a Private Limited Company questions the legality of the order in Annexure-2 passed by the opposite party suspending its registration certificate as a dealer.
2. The petitioner-Company has its factory at Jiabahal, Kalinga, in the district of Sundargarh and has registered itself under the Orissa Value Added Tax Act (OVAT). It carries on business of manufacturing and deals with pig iron, sponge iron, steel, alloy steel, iron ore, all Ferro and metals and also carries on different business connected thereto. On 25.3.2010, a notice was issued to the petitioner under Rule 32(2) of OVAT Rules, 2005 requiring the petitioner to produce evidence, record/documents on the allegation that it has knowingly furnished incomplete/incorrect information in the return furnished for the tax period/periods and failed to pay tax, interest and penalty due under the Act for the said period. The other allegation is that the petitioner conducted business in such manner that there is reasonable apprehension of evasion of tax or attempt to evade tax. Though this notice was given in Annexure-1, copy of the order in Annexure-2 suspending the registration certificate was not enclosed. After submitting application for supply of copy of the order of suspension, the same was supplied on 5.4.2010 whereas the order in Annexure-1 was passed on 25.3.2010. After obtaining a copy of the said order, this writ application has been filed challenging the legality of the same solely on the ground that prior to issue of the said order the petitioner had not been given an opportunity to show cause.
3. Shri A.K. Parija, the learned Senior Counsel appearing for the petitioner relied on a decision of this Court in the case of M/s. Ramkumar Jaigopal v. Assistant Commissioner of Sales Tax, Sambalpur, reported in 2007 (I) OLR 534 and another decision of this Court in the case of Sidhartha Engineering Pvt. Ltd. v. Assistant Commissioner of Sales Tax and another, reported in 1999, Vol.115, Sales Tax Cases, page-478 to support the above contention.
4. The learned Standing Counsel for Commercial Tax Department opposed the petition on the ground that under the OVAT Act, prior to passing of an order of suspension, there is no requirement of issue notice to show cause and the petitioner can apply for restoration of the registration under the Act. Shri Kar, the learned counsel for the Department further submitted that considering the allegation against the petitioner, suspension of the registration became absolutely necessary in order to stop the business. Keeping such eventuality in mind, the legislators never thought of issuance of a notice to show cause prior to suspension of the registration. So far as the two decisions cited by the learned Senior Counsel for the petitioner is concerned, Shri Kar, the learned counsel appearing for the Department tried to distinguish both the decisions on facts.
5. Admittedly before issuance of the order of suspension, the petitioner had not been served with any notice to show cause. Admittedly there is no provision in the Act or the Rules for service of a notice to show cause before an order of suspension is passed. Under these circumstances, the Court is called upon to decide as to whether a notice in the present case is required to be served on the petitioner to show cause before the order of suspension was passed or not. In the case of M/s. Ramkumar Jaigopal v. Assistant Commissioner of Sales Tax, Sambalpur, the challenge was in relation to cancellation of registration certificate. The petitioner therein was a registered dealer under the Sales Tax authorities for more than 58 years and without giving an opportunity of hearing, the registration certificate was cancelled. The Court not only dealt with Section 31 of the Act dealing with cancellation of certificate of registration but also Section 30 of the Act which dealing with suspension of registration certificate. In paragraph-8 of the judgment relying on an earlier decision of the Hon'ble Supreme Court in the case of Smt. Maneka Gandhi v. Union of India and another, reported in AIR 1978 SC 597, the Court made the following observation:
" It must be kept in mind that the power of suspension/cancellation of registration certificate of a dealer, clearly imposes civil consequence and in this respect law is well settled in the case of Smt. Maneka Gandhi v. Union of India and another reported in AIR 1978 SC 597 wherein, the Apex Court has held that the rule of natural justice is embodied in every Statute and even where there is no specific provision for the same and when an administrative action involves civil consequence, the doctrine of natural justice must be held to be applicable."
6. As is evident from reading of the judgment though the case related to cancellation of registration certificate, the Court not only considered the question of cancellation of registration certificate but also suspension thereof and came to hold that the power of suspension/cancellation of registration certificate of a dealer clearly imposes civil consequence and therefore, even where there is no specific provision to follow the principles of natural justice, when an administrative action involves civil consequence, the doctrine of natural justice must be held to be applicable.
In the case of Sidhartha Engineering Pvt. Ltd. v. Assistant Commissioner of Sales Tax and another, in paragraph-8 of the judgment, the Court held that natural justice is an inseparable ingredient of fairness and reasonableness. Observance of the principles is the pragmatic requirement of fair play in action. The rules of natural justice operate as implied mandatory procedural requirement and non-observance whereof invalidates the action.
Reference may also be made to some other decisions in this connection. In the case of Sahara India (Firm) v. Commissioner of Income-Tax and another, reported in (2008) 300 ITR 403 (SC) referring to large number of earlier decisions including the case of Maneka Gandhi (Mrs.) v. Union of India (supra), the Hon'ble Supreme Court came to a conclusion that even an administrative order or decision in matters involving civil consequences has to be made consistently with the rules of natural justice. The concept of natural justice is invariably read into administrative actions involving civil consequences, unless the statute conferring the power excludes its application by express language. A similar view was expressed by this Court in the case of M/s. Iron Exchange India Ltd. V. State of Orissa and others, reported in 1995 (I) OLR 402. The Court held in the aforesaid decision that principle of natural justice must be read into unoccupied interstices of the statute unless there is a clear mandate to the contrary. Such power is inherent in every Tribunal, judicial or quasi-judicial character and the purpose is to avoid miscarriage of justice. In the case of Basanta Kumar Sahoo v. The State of Orissa and others, reported in 1990 (II) OLR 408 while dealing with the case under the Urban Land (Ceiling and Regulation) Act, 1976, the Court held that where valuable right is sought to be taken away, an opportunity of hearing though not specifically provided in the Act, is desirable to be given. In the case of Kanak Cement Pvt. Ltd. V. Sales Tax Officer, Assessment Unit, Rajgangpur, reported in (1997) Vol.105 Sales Tax Cases 112, the Court observed that it is a fundamental requirement of the principles of natural justice that if any person is likely to be affected by the use of any material collected by the Revenue, those are to be brought to his notice, and disclosed to him. The requirement of natural justice is to disclose by way of confrontation the materials collected and proposed to be used against a dealer.
Admitted in the Act and the Rules, though there is no provision for affording an opportunity of hearing before an order of suspension is passed, the said principle of natural justice has also not been expressly excluded.
7. On reading of above judgments, it is clear that even in respect of suspension of registration certificate, civil consequence follows and therefore, observance of principle of natural justice is a necessity. We are, therefore, of the view that even though the statute is silent about issuance of a notice to show cause prior to passing of an order of suspension under Section 30 of the Act, when such order of suspension results in civil consequences, the principles of natural justice should be followed. We are, therefore, of the view that the order of suspension of registration certificate is liable to be quashed even though it is open for the petitioner under the Act to seek for restoration of the same.
8. Another submission was made by the learned counsel appearing for the Department that if the order of suspension is quashed, the petitioner is likely to get involved in such activities for which his registration had been put under suspension. In order to avoid such a situation, we dispose of this writ application with the following direction:
The order of suspension in Annexure-2 is quashed and it will be open for the Department to proceed under Section 30 of the Act after giving an opportunity of hearing to the petitioner to meet the allegations contained in Annexure-1. In the event, such action is taken by the Department, till an order is passed under Section 30 of the Act, the petitioner shall be permitted to run its business subject to the condition that the same shall be done under the supervision of an Officer of the opposite party-Department and every day transaction shall be intimated to the Department through the Officer who may be deputed to supervise the same. Writ petition allowed.