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Civil Appeal No. 3289 of 2010. Case: Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota Vs Shukla and Brothers. Supreme Court (India)

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Case NumberCivil Appeal No. 3289 of 2010
JudgesS. H. Kapadia and Swatanter Kumar, JJ.
IssueEmployees Provident Funds and Miscellaneous Provisions Act, 1952; Rajasthan Sales Tax Act, 1994 - Section 86; Industrial Disputes Act, 1947 - Section 17B; Code of Civil Procedure, 1908 - Orders 14 Rule 2, Order 20, Rule 1; Constitution of India, 1950 - Articles 136, 142, 226, 227; Income-tax Act, 1961
Citation2010 (254) ELT 6 (SC), 2010 (4) SCR 627, 2010 (4) KarLJ 256, JT 2010 (4) SC 35, (2010) 30 VST 114 (SC), 2010 (2) WLN 45, (2010) 4 SCC 785, 2011 (22) STR 105 (SC)
Judgement DateApril 15, 2010
CourtSupreme Court (India)

Judgment:

Swatanter Kumar, J.

  1. Delay condoned.

  2. Leave granted.

  3. The present appeal under Article 136 of the Constitution of India is directed against the Judgment dated 29th February, 2008 passed by the High Court of Judicature for Rajasthan Bench at Jaipur in S.B. Sales Tax Revision Petition No.92 of 2007, and in exercise of its power under Section 86 of Rajasthan Sales Tax Act 1994 (for short `the Act'). The impugned Order reads as under:-

    "After having carefully gone through the material on record, since after due consideration proper discretion has already been used by the Deputy Commissioner (Appeals) as also Rajasthan Tax Board, in the facts and circumstances, no further interference is called for by this Court.

    The revision petition is dismissed accordingly as having no merits."

  4. The Learned Counsel appearing for the appellant, Assistant Commissioner of Income Tax has argued that Order passed by the High Court does not record any reasons for dismissing the Revision Petition preferred by the Department. According to the Learned Counsel, various contentions raised as grounds in the Revision Petition and two questions of law formulated by the Department for consideration in the High Court while impugning the judgment of the Rajasthan Tax Board, Ajmer have not been reverted to by the High Court, resulting in serious prejudice caused to the present petitioner. On merits as well, challenge has been raised to the Order of the Tax Board as well as that of the Order of the High Court.

  5. It may be necessary for that to refer to the basic facts giving rise to the present appeal. The respondent claimed to be a contractor who has obtained impartible contract of constructing 400 shops in JP Market, Chhota Talab, Kota. As per the contract the shops were to be handed over to Cloth Merchant Association, Kota. The respondent had received Rs.95,26,276.00 in the year 1997-98 and Rs.22,38,026.00 in the year 1998-99. The assessing authority formed an opinion and recorded a finding that the shutters and doors were not manufactured from tax paid raw material in impartible contract and as such shutter was excluded from labour charges in the above years, and levied tax, interest, penalty and surcharge upon the respondent. The order of the assessing authority dated 19th July, 2000 and 22nd February, 2001 respectively were challenged by the respondent before the Deputy Commissioner (Appeals), Kota and intended that if the shutters were not installed in the shops, then as per the contract the shops would not have deemed to be complete. Relying upon the judgments of the Supreme Court in Gannon Dunkerley & Co. (Madras) Ltd. - State of Madras [AIR 1958 SC 560] as well as State of Rajasthan Vs. Man Industrial Corporation [(2003) 7 SCC 522] it was contended that in an impartible work contract as per the terms of that contract, the material has been used in work contract and there was no contract for manufacturing shutters. Thus on account of execution of impartible work contract, the property was immovable and tax could not be levied thereon.

  6. The appeal preferred by the respondent was accepted by the Deputy Commissioner vide his Order dated 23rd February, 2002. This Order was assailed in appeal by the Department before the Rajasthan Tax Board which also came to be rejected vide Order dated 18th October, 2003. The Board accepted the plea of the respondent that the shutters and doors were manufactured from tax paid raw material in a work contract, therefore, could not be the goods transferred for the purposes of levy of tax, holding the same not justifiable to set aside the levy of tax, penalty, interest or surcharge. Aggrieved from the Order of the Board dated 23rd February, 2002, the appellant filed Tax Revision before the High Court and inter alia and raised the following questions of law:-

    1. Whether the Rajasthan Tax Board Ajmer was justified in dismissing the appeal of the petitioner in the facts and as mentioned above?

    2. Whether the iron rolling shutters & doors were fixed by the assessee on the shops are taxable or not, when no tax was paid by the assessee on the construction of iron rolling shutters and doors?

  7. As is evident from the facts narrated in the Revision Petition and the grounds raised besides raising the question of law, a factual controversy was also raised going to the very root of the case, that the rolling shutters & doors fixed by the respondent on the shops were not manufactured of tax paid material. Thus, question of law, mixed questions of law and facts were not examined by the High Court in some detail, but as already noticed, by one line order the Revision Petition was dismissed. During the course of hearing, we were informed that arguments were also addressed with reference to judgments of this Court which were also cited before the Board. However we find no mention thereof in the impugned Order. It was also contended that similar questions do arise in number of other cases, thus it was expected of the High Court to deal with the contentions rather than pass a cryptic order.

  8. We do find that there is substance in the contention raised on behalf of the petitioner before us. It would have been desirable if the High Court would have recorded some reasons for rejecting the Revision Petition preferred by the Department.

  9. The increasing institution of cases in all Courts in India and its resultant burden upon the Courts has invited attention of all concerned in the justice administration system. Despite heavy quantum of cases in Courts, in our view, it would neither be permissible nor possible to state as a principle of law, that while exercising power of judicial review on administrative action and more particularly judgment of courts in appeal before the higher Court, providing of reasons can never be dispensed with. The doctrine of audi alteram partem has three basic essentials. Firstly, a person against whom an order is required to be passed or whose rights are likely to be affected adversely must be granted an opportunity of being heard. Secondly, the concerned authority should provide a fair and transparent procedure and lastly, the authority concerned must apply its mind and dispose of the matter by a reasoned or speaking order. This has been uniformly applied by courts in India and abroad.

  10. The Supreme Court in the case of S.N. Mukherjee v. Union of India [(1990) 4 SCC 594 ], while referring to the practice adopted and insistence placed by the Courts in United States, emphasized the importance of recording of reasons for decisions by the administrative authorities and tribunals. It said "administrative process will best be vindicated by clarity in its exercise". To enable the Courts to exercise the power of review in consonance with settled principles, the authorities are advised of the considerations underlining the action under review. This Court with approval stated:-

    the orderly functioning of the process of review requires that the grounds upon which the administrative agency acted be clearly disclosed and adequately sustained.

  11. In exercise of the power of judicial review, the concept of reasoned orders/actions has been enforced equally by the foreign courts as by the courts in India. The administrative authority and tribunals are obliged to give reasons, absence whereof could render the order liable to judicial chastise. Thus, it will not be far from absolute principle of law that the Courts should record reasons for its conclusions to enable the appellate or higher Courts to exercise their jurisdiction appropriately and in accordance with law. It is the reasoning alone, that can enable a higher or an appellate court to appreciate the controversy in issue in its correct perspective and to hold whether the reasoning recorded by the Court whose order is impugned, is sustainable in law and whether it has adopted the correct legal approach. To sub-serve the purpose of justice delivery system, therefore, it is essential that the Courts should record reasons for its conclusions, whether disposing of the case at admission stage or after regular hearing.

  12. At the cost of repetition, we may notice, that this Court has...

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    • Mondaq India
    • 27 May 2011
    ...of the Apex Court with regard to non-speaking Orders made in Assistant Commissioner, Commercial Tax Department v. Shukla and Brothers (2010) 4 SCC 785 that since reason was the very life of law, law itself would cease in the absence of reason. Reason was necessary in order to eliminate unce......

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