PRINCIPLES OF NATURAL JUSTICE- “Audi
Alteram Partem” and “nemo judex in causa sua” in Tax matters
Introduction:
The principles of
natural justice have their roots in two Latin maxims:”Audi alteram
partem” and “nemo judex in causa sua”.
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: “Justice must not only be done, but must be seen
to be done”.
When justice is not
meted out for the assessees, they approach the High Court without exhausting
the remedy of appeal.
It is trite law that if
the order passed by the original authority is in violation of the fundamental
rights guaranteed under the Constitution of India; violation of the principles
of natural justice; ultra-vires the provisions of the relevant law; grave error
in the order and miscarriage of justice, then the question of waiving the
appellate remedy will arise and the Court, under Article 226 and 227 of the
Constitution of India, can invoke the Writ jurisdiction and interfere with such
order passed by the original authority.
Legal provisions:
Under Article 226 of the
Constitution of India, the High Court has vast powers as this Court has under
Article 32 of the Constitution of India, and can exercise such powers in those
cases where the statutory authority has not acted in accordance with the
provisions of the enactment in question, or in defiance of the fundamental
principles of judicial procedure, or has resorted to invoke the provisions
which are repealed, or when an order has been passed in total violation of the
principles of natural justice. It is a well settled position that where an
order has been passed in breach of the principles of natural justice, it would
be open for the writ Court to interfere. The principles of natural justice have
come to be known as being part of the guarantee contained in Article 14 of our
Constitution i.e., ‘the concept of equality’.
In Service Tax, Sec 73
(2) of the Finance Act 1994 provides that Central Excise Officers shall after
considering the representation if any made by the person on whom notice is
served under sub section 1 determine the amount of service tax due from or
erroneously refunded to such person not being in excess of the amount specified
in the notice and there upon such person shall pay the amount so determined. On
representation from the assessee side, the statutory authorities shall
determine the liability.
In Central Excise, Section
35Q of the Central Excise Act, 1944 provides for appearance by authorized
representative before a central excise officer or Appellate Tribunal in
connection with any proceedings. The Adjudicating authority may, if sufficient
cause is shown, at any stage of proceeding referred to above, grant time, from
time to time, to the parties or any of them and adjourn the hearing for reasons
to be recorded in writing.
In Customs, under
section 28(2) of the Customs Act, 1962 which reads as follows:
“The proper officer,
after considering the representation, if any, made by the person on whom notice
is served under sub-section (1), shall determine the amount of duty or interest
due from such person (not being in excess of the amount specified in the
notice) and thereupon such person shall pay the amount so determined.”
Under Tamilnadu VAT Act,
Section 22 (4) provided 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”. 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.
D.P. Mahesh Vs Assistant
Commissioner (CT) (Addl.), Thiruvanmiyur Assessment Circle, Chennai [2013] 58
VST 434 (Mad). The respondent has passed the
impugned assessment order, which amounts to violation of the principles of
natural justice. Considering the facts and circumstances of the case and in the
interest of justice, the impugned assessment order dated May 18, 2012 is
quashed with a direction to the respondent to consider the matter afresh after
giving opportunity to the petitioner.
Reasonable opportunity
was not given to the petitioner since notice itself had not been served on the
petitioner. The order in question was liable to set aside and the
assessing authority was to proceed and finalise the assessment in accordance
with law after giving the petitioner reasonable opportunity of being heard (In
Palaniappa Sago Factory Vs DCTO Attur Assessment Circle (2009) 24 VST 248).
Hon’ble Supreme Court in
the case of Mohinder Singh Gill v. Chief Election Commissioner, AIR 1978
SC 851, quoted the following:
“Indeed, natural justice
is a pervasive facet of secular law where a spiritual touch enlivens
legislation, administration and adjudication, to make fairness a creed of life.
It has many colours and shades, many forms and shapes and, save where valid law
excludes, it applies when people are affected by acts of authority. It is the
bone of healthy government, recognized from earliest times and not a mystic
testament of judge-made law. Indeed from the legendary days of Adam-and of
Kautllya’s Arthashastra-the rule of law has had this stamp of natural justice,
which makes it social justice. We need not go into these deeps for the present
except to indicate that the roots of natural justice and its foliage are noble
and not new-fangled. Today its application must be sustained by current
legislation, case law or other extant principle, not the hoary chords of legend
and history. Our jurisprudence has sanctioned its prevalence even like the
Anglo-American system.”
Conclusion:
The opportunity of
providing a personal hearing or submitting explanation to an assessee is a
basic obligation and without considering this requirement the orders are passed
by the assessing officers and by appellate forums which is violation of a
rule of natural justice results in arbitrariness and in the author’s view it is
discrimination. The decisions of the Appellate Forums or other the statutory
authority should be specific and speaking orders are to be passed. They
must contain reasons for the decision. Reasons may be elaborate or may be
brief. But these are beginning to be considered necessary to ensure fair
decision making. This is the crux of the Latin maxim “Audi Alteram partem”.
In Ridge v. Baldwin and Anisminic Ltd. v. Foreign Compensation Commission
the House of Lords in England has made it clear that breach of natural
justice nullifies the order made in breach. If that is so then the order made
in violation of the principles of natural justice was of no value.
