judgement:
Appeal Nos.
351 359/72.
Appeals from the Judgment and Order dated 7 5 1971 of the Orissa High Court in O.J.C. Nos. 1185 to 1190, 1223 and 1224 of 1970 and 41/71 and CiviI AppeaI Nos.
1855 1863, 2091/72 and 1802/74.
Appeals by Certificate/Appeals by Special Leave from the Judgments and Orders dated 7 5 1971, 3 2 1971 and 28 3 1974 of the 814 Orissa High Court in O.J.C. Nos.
1185 1190, 1223, 1224 and 1226/ 70, 850/70, 589/72 and Civil Appeals Nos.
1892 1893 of 1971, 1302, 2071 and 12351236 of 1972.
Appeals from the Judgment and Orders dated 15 5 1970, 16 41971, and 6 9 1971 of the Orissa High Court in O.J.C. Nos. 329 and 357/70, 786/.70, 242/67, 859 and 863/70.
Vinoo Bhagat for the Appellants in CAs.
351 359/72 and RR.
in CAs.
1859 1862/72.
Gobind Das and G.S. Chatterjee for the Appellants in rest of the Appeals, except 1802/74 and RR.
in CAs.
351 359/72.
R.K. Garg and S.C. Agarwal for Appellants in CA 1802/74 and B.P. Maheshwari and Suresh Sethi for Respondents in CAs.
12351236/72.
B. Parthasarthy for RR in CA.
1802/74.
The Judgment of the Court was delivered by J.
These appeals by certificate or special leave are directed against judgments of the Orissa High Court dated May 15, 1970, February 3, 1971, April 16, 1971, May 7, 1971, September 6, 1971 and March 28, 1974.
They arise out of several writ petitions.
The facts which gave rise to the petitions changed from time to time largely because of amendments in the law, and that was the reason for the filing of separate writ petitions resulting in the impugned judgments of the High Court, but we have heard them together at the instance of the learned counsel for the parties and will dispose them of by a common judgment.
The nature of the controversy in these cases is such that it will be enough to state the basic facts for the purpose of appreciating the arguments of counsel for the parties.
The Collector of Mayurbhanj issued a notice on February 3, 1970 by which he invited tenders for the grant of li cences for establishing 70 outstill shops for 1970 71.
Ajodhya Prasad Shah gave the highest bid for a group of seven shops, in one lot, for Rs. 34,000/ per month.
His bid was accepted and his name was entered in the prescribed register, and the entry was signed by the successful bidder and the Collector.
Ajodhya Prasad accordingly deposited Rs. 68,000/ on account of two months ' "fees", in ad vance, as required by rule 103 of the Board 's Excise Rules, 1965.
Raghunandan Saha, who was the unsuccessful bidder, felt aggrieved and filed an appeal, but it was dismissed by the Excise Commissioner on March 16, 1970.
The Board of Revenue also refused to interfere.
Ajodhya Prasad claimed that in the mean time he made arrangements for establishing his shops and incurred an expenditure of about Rs. 1,50,000/ .
He therefore approached the authorities concerned for the issue of the licenses for running the shops from April 1, 1970.
He approached , the Superintend ent of Excise for depositing Rs. 34,000/ for the month of April, but the Superintendent did not pass the deposit challan.
Ajodhya Prasad thereupon filed a writ petition (O.I.C. No. 329 of 1970) in the High Court with the allega tion that the Collector 815 was not acting according to the law as the State Government had issued instructions to him not to.
issue the licenses.
Ajodhya Prasad prayed in his petition for the issue of directions for ' the issue of licenses and quashing the State Government 's instructions to the contrary.
Raghunandan Saha also filed a petition (O.J.C. No. 357 of 1970) on April 13, 1970.
The Collector issued a notice for reauction on May 1, 1970 and Ajodhya Prasad amended his petition for quashing the notice also.
The State Government and the other respondents traversed the claim in Ajodhya Prasad 's writ petition and pleaded, inter alia, that the bids at the auction were not satisfac tory and, in the interest of the State revenue, the State Government had passed the orders for not accepting Ajodhya Prasad 's bids.
The High Court examined the questions whether Ajodhya Prasad was entitled to the issue of the licenses for the seven shops and whether the State Govern ment had the authority to direct the withholding and reauc tioning of the licenses, and held, inter alia, that the State Government had no power to interfere with the auction held by the Collector after it had "become final in appeal and revision", and could not direct a reauction.
The High Court examined the nature of the realisation at the auction and held that it was a tax which was not contemplated by section 38 of the Bihar and Orissa Excise Act, 1915, herein after referred to as the Act, and that rule 103(1) of the Board 's Excise Rules in regard to the fees for the licenses was not authorised by the Act and was in excess of the rule making power of the Board.
The High Court also held that the "auction price for a license is not excise duty within the meaning of Entry 51 of List II of the Seventh Schedule to the Constitution" and it was not open to.
the Collector "to follow the process of auctioning for deter mining the license fee" which was really a tax in the garb of a fee.
It held that the aforesaid rule 103 was incompe tent and ultra vires the Act.
On the question of grant of the "exclusive privilege" under section 22 of the Act, the High Court held that what was purported to be given under the sale notice was not the grant of .an exclusive privi lege.
In taking that view the High Court stated that notice had not been issued under section 22 (1) of the Act and the Collector had no authority to issue such a notice In that view of the matter, the High Court did not express any final opinion as to whether the licence was to be granted for an exclusive privilege to manufacture and sell 'liquor.
The High Court accordingly quashed the direction of the State Government dated April 15, 1970 for reauctioning the license and declared that rule 103(1) of the Board 's Excise Rules was ultra vires the Act.
Appeals Nos. 1892 and 1893 of 1971 are directed against that judgment of the High Court dated May 15, 1970, on certificates.
The State Government issued the Bihar and Orissa Excise (Orissa Amendment) Ordinance of 1970 and the State Govern ment issued a fresh order dated August 19, 1970 under the provisions of the amended section 29(2) of the Act for fresh settlement of the shops, and wrote to the Collector of Mayurbhanj to call for tenders in accordance with that order.
The Collector called for tenders within a week.
816 Ajodhya Prasad thereupon filed another writ petition (O.J.C. 'No. 850 of 1970) for quashing the Collector 's tender notices and for a direction to the authorities con cerned to grant a license to him on the basis of the earlier auction.
The Bihar and Orissa Excise (Orissa Amendment) Act, 1970 was passed on October 5, 1970 and the ordinance was re pealed.
That was followed by the Orissa Excise (Exclusive Privilege) Rules, 1970, which were made under section 89 of the Act.
The respondents in Ajodhya Prasad 's writ petition No. 850 of 1970 pleaded that the amendments to the Act were valid and that the State Government had the right to grant an exclusive privilege for the purposes mentioned in section 22 of the Act.
The money so realised was consideration for the exclusive privilege under section 22 and was neither an excise duty nor a tax nor a fee.
It was also pleaded that the tender was in accordance with the rules as the authority to accept the tender was the State Government.
The High Court examined Ajodhya Prasad 's writ petition (No. 850 of 1970 in its Judgment dated February 3, 1971.
It held that the order of the State Government dated August 19, 1970 for inviting tenders was invalid as the authorities for fixing the procedure under the amended section 29(2)(b) had not been specified, the Government had "appropriated for itself absolute and naked and arbitrary power ' to accept any tender or reject any tender for any reason whatsoever or without any rhyme or reason" and the order left it to the uncontrolled discretion of the authority concerned to determine the adequacy of the amount offered in the tender.
As regards the claim for the issue of a license under sec tion 6, the High Court held that as the petitioner was the highest bidder on February 20, 1970 and his name was entered in the bid register and the entry was signed, the petition er was entitled to the grant of the exclusive privilege under section 22 by virtue of section 6(a) of the Amending Ordinance irrespective of the validity of rule 103 (1) of the Board 's Excise Rules.
The High Court accordingly held that section 6(a) of the Amending Ordinance was valid and the grant of seven ' shops to the petitioner, for the manu facture and retail sale of country liquor was therefore validated "as the grant of an exclusive privilege under section 22 of the Act" and he was entitled to license under sub section (2) of that section.
The Order of the State Government dated August 19, 1970 and the Collector 's tender notice were quashed and the Collector was directed to issue the license for the seven shops to him.
Siba Prasad Saha who filed the writ petition (No. 786 of 1970) in August 1970, after the first judgment of the High Court dated May 15, 1970 for refund of the license fee and for non payment of any fee in the future, as he was a licen see for several liquor shops, amended it in the light of the subsequent developments.
The High Court took the view in its judgment dated April 16, 1971 that sections 2 to 5 of the Amending Ordinance, or the Amending Act (17 of 1970) were not made retrospective.
It took note of this Court 's 817 decision in Krishna Kumar Narula etc.
vs The State of Jammu and Kashmir and others(1) that a citizen had the fundamental right to carry on business in liquor and all that the State could do.
was to impose reasonable restric tion thereon.
It also held that in so far as section 29(2) of the Act provided that the sum payable under sub section (1) thereof shall be determined "otherwise" than by calling tenders or by auction, it was unconstitutional That portion ,of sub section (2)(a) was therefore struck off.
The High Court held further that what was realised by the State was not a fee or tax, as the primary purpose of the Act was to.
restrict the manufacture and sale of country liquor.
It accordingly held as follows, "We are, therefore, satisfied that the provi sion in Section 22 of the Act for grant to any person of the exclusive privilege of manufac ture and sale of country liquor for a sum, the method of determination of which is provided in Section 29, are provisions which are calcu lated to restrict and control trade in liquor although incidentally revenue is earned for the State thereby and that Entry in List II of the Seventh Schedule confers power on the State Legislature to enact such a regulatory measure and consequently the State Legislature has legislative competence to enact Sections 22 and 29.
" The High Court accordingly held that section 22 and section 29 without the expression "or otherwise" in clause (a) of sub section 2 were valid and constitutional.
The High Court then examined the effect of section 6 of the Amend ing Act of 1970, and held that as retrospec tive effect was not given to sections 2 to 5 of that Act, the validity of the money rea lised by the State had to be judged with reference to the unamended provisions, and held as follows, "It, therefore, follows that by reason of the fact that Sections 2 to 5 of the Amending Act were not made retrospective in operation, the effect of Section 6 is that thereby the Legis lature had directed the State to disregard the decision given by this Court in Ajodhya Pra sad 's case (I.L.R. 1971 Curt. 51 ) that the amount realised by the auction is illegal.
This virtually amounts to judicial exercise of power by the legislature a power which the Legislature does not possess.
We, therefore hold that Sections 2 to 5 of the Amending Act having not been made retrospective, Section 6 is ultra vires the powers of the Legislature.
" The High Court however held that although the ' license fee collected by the State was illegal, the petitioner had already enjoyed the benefit under the license and had volun tarily participated in the auction, and was not entitled to an order for its refund.
A similar view was taken in the judgment dated April 16,1971 in O.J.C. No. 242 of 1967 and the judgment dated May 7, 1971 in (1) ; 818 O.J.C. NOS.
1185 1190, 1223, 1224 and 1226 of 1970.
Those judgments have given rise to civil appeals Nos. 2071, 1855 1863 and 351 359 Of 1972 (cross appeals).
O.J. Cs.
Nos. 859 and 863 of 1970 were diposed of by separate judgments dated September 6, 1971 which followed the earlier judgment dated April 16, 1971 in Siba Prasad Saha 's case and that has given rise to appeals Nos. 1235 and 1236 of 1972.
The Bihar and Orissa Excise (Orissa Second Amendment) Act, 1971 (10 of 1971) was passed to set right the defects in the law.
Stated briefly that Act made the amendments to sections 2, 7, 29, 37 ' and 90 retrospective and validated the earlier acts.
A writ petition (O. J.C. No. 589 of 1972) was filed to challenge the vires of section 22 and 29 of the Act.
The main judgment in the matter was delivered in O.J.C. No. 1036 of 1971, on January 3, 1974.
In that judgment the High Court examined the challenge to the vires of sections 22 and 29 of the Act and the claim for refund of the money already paid with reference to the amendments to the Act.
It fol lowed the earlier decision in Siba Prasad Saha 's case of April 16, 1971 (I. L.R.1971 Cuttack 777) and dismissed the writ petitions and that/ms led to the filing of civil ap peals Nos. 1235 and 1236 of 1972.
The last judgment was delivered on March 28, 1974 in O.J.C. No. 589 of 1972, in Siba Prasad saha 's case.
The petitioner there was the grantee of the exclusive privilege for sale of country liquor: during the year 1972 73 for some shops in Mayurbhanj district.
The ' petitioner challenged the vires of sections 22 and 29(2) as amended, and prayed for the consequential reliefs.
The High Court held that the case was completely covered by its decision dated January 3, 1974 in O.J.C. No. 1036 of 1971 and dismissed the peti tion.
It will tires appear that these appeals are inter con nected and that is why we have thought it desirable to examine them in a common, judgment.
As has been stated, Civil Appeals Nos.
1892 and 1893 of 1971 arise out of ' O.J. Cs.
392 and 357 of 1970 which have been decided by the judgment of the High Court dated May 15, 1970.
It has been argued by Mr. Govind Das on behalf of the appellants that the High Court erred in hold ing that the sale notice issued by the Collector was not for the grant of an exclusive .privilege under subsection (1) of section 22 of the Act because the Collector had no authority to issue a notice under that sub section, as the power of the ' State Government in that respect had been delegated to the Board of Revenue.
Sub section (1) of section 22 of the Act provides that the State Government may grant to any person, On such condi tions and for such periods as it may think fit, the exclu sive privilege, inter alia, of manufacturing or selling retail any country liquor.
The proviso to the sub section requires that public notice shall be given of the intention 819 to grant any exclusive privilege of that nature and that a. decision would be taken after considering the objections made in that respect.
Once a decision is taken under ,sub section (1) to grant the exclusive privilege within any specified area, sub section (2) provides that no grantee of such a privilege shall exercise the same "unless or until he has received a license in that behalf from the Collector or the Excise Commissioner.
" It has been stated at the Bar by Mr. Govind Das, and has not been controverted that, as. had been averted in ' the memorandum of appeal, the requirement of sub section (1) of section 22 had already been complied with by the State Government, and that the Collector was not concerned and did not in fact issue any public notice for purposes of sub section (1) of section 22.
A reading of the Collector 's notice, which admittedly was in Form G.L. 10, shows that it related to the auction of the right to open a shop at the site named in the notice and the payment of the license fee therefor.
The High Court therefore went wrong in holding that the issue of the notice in Form G.L. 10 negatived the contention that what was proposed to be given was the exclusive privilege to manufacture and sell country liquor.
By virtue of section 7(1), the administra tion of the Excise Department and the collection of excise revenue within the district vested in the Collector, and we are unable to think, that his notice in Form G.L. 10 was sufficient to show that the exclusive privilege for retail sale of country liquor, under the outstill system, was not proposed to be given to the successful bidders at the auc tion.
The true nature of the proceeds of the auction held by the Collector in such a case has been examined by this Court in Nashirwar etc.
vs The Slate of Madhya Pradesh, C) Har Shankar and others vs The Dy.
Excise and Taxation Com missioner and others(2) and Thakur Prasad Sao and others vs The Member, Board of Revenue and others etc.
(? '). In Na shirwar 's case (supra) this Court examined the constitution al validity of the provisions in the Central Provinces Excise Act for granting leases in respect of liquor by public auction, and of the Abkari Act of the Kerala State placing restrictions on the manufacture and sale etc.
of liquor.
After considering all the decided cases includ ing Narula 's case (supra) in which it was held that a citizen had a fundamental right to.
do business and deal in liquor, this Court referred to its decision in State of Orissa and others vs Harinarayan Jaiswal and others(4) in which Narula 's case was explained, and held as follows, "For these reasons we hold that the State has the exclusive right or privilege of manufacturing and selling liquor.
The State grants such right or privilege in the shape of a licence or a lease.
The State has the power to hold a (1) ; (2) ; (3) ; (4) [1972].3 S.C.R. 784.
820 public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease.
" While taking this view this Court held that the State Legislature was authorised to make a provision for public auction by reason of the power contained in Entry 8 List II of the Seventh Schedule to the Constitution and that there was "no fundamental right of citi zens to carry on trade or to do business in liquor.
" The matter again came up for consideration in Har Shankar 's case (supra) with reference to the provisions of sections 27 and 34 of the Punjab Excise Act, 1914, where the appellants gave bids at public auctions.
It was held that the amount payable by them, as licensees, was neither a fee in the technical sense nor a tax, but was in ' the nature of "price of a privilege" and that auctions were only a mode or medium for ascertaining the best price obtainable therefor.
Thakur Prasad 's (supra)was a case directly under the provisions of the Act.
It also related to the outstill system.
It was held that "the State has the exclusive right and privilege of manufacturing and selling liquor" and that it has the "power to hold a public auction for the grant of such a right or privilege and to accept payment of a sum therefor.
" It was accordingly held that the right granted to the appellants by public auction and the li censes issued to them was "clearly an exclusive privilege within the meaning of section 22(1) of the Act" and that it has expressly been provided in section 29 that it would be permissible for the State Government to accept payment of a sum in "conSideration" of the exclusive privilege under section 22.
There can be no doubt therefore that the High Court erred in taking a contrary view.
The High Court has tried to support its view by refer ring to the condition stated in Form G.L. 10 for the opening of additional shops during the currency of the license, and has stated that an exclusive privilege under section 22 "cannot comprehend exercise o[ such power once it is granted for a specified period.
" This was clearly an erroneous view because it is not disputed before us that no such condition was inserted in the license at all.
What the licensee therefore received under the license was an exclu sive privilege of manufacturing and selling liquor under the outstill system within the meaning of section 22 of the Act.
The High Court has held that after the acceptance of the bid all that remained was to issue a license and that the Collector committed an illegality in ordering a reauction under the directions of the State Government.
Such a view presupposes that a binding, obligation had come into existence in favour of the bidder by accepting a deposit from him even though this was done on the express condition that it was tentative and was not an acceptance of his bid.
We do not think that what the High Court held to be an "acceptance of the bid" at the "auction", even after the announcement of an express condition 821 attached to it that the knocking down of the bid would not really be an acceptance of it by the Government, could be an acceptance of the bid at all.
In the peculiar facts and circumstances of the auction, the bids were, apparently, nothing more than offers in response to invitation to make tenders, and such auctions were the mode of ascertaining the highest offers.
The basic conditions for the emergence of rights through offers or conditions made and accepted, and acted upon, by paying any specified or agreed price as consideration, were thus wanting in this case.
In fact the express and advertised terms of the auction made it clear that the money tendered was to be deemed to be deposited tentatively, pending the acceptance of the bid.
So what we have before us are neither offers nor acceptance by the Government.
There were only offers by the bidders to pur chase the rights, subject expressly to their acceptance or rejection by the State Government.
The essentials of any agreement and the mutuality of obligations were thus absent altogether.
Moreover it was not an ordinary auction where binding agreement could be deemed to be concluded at the fall of the hammer, creating mutually enforceable obligations.
Those were only so called auctions, adopted as means for ascer taining the highest offers for the exclusive privileges which the Government alone could grant for carrying on a trade or business.
considered noxious, under the law and which, because of its special character, could be regulated in any way, or even prohibited altogether, by the Govern ment.
This special character of the trade or business would appear from the power of the State Government to grant the exclusive privilege to.
carry on trade in the manufacture and sale of liquor.
It will be recalled that section 22(1) provides that the State Government "may grant to any person, on such conditions and for such periods as it may think fit, the exclusive privilege" in question: Sub section (2) of section 22 enacts that a grantee of such a privilege shah not exercise it "unless or until he has received a license in that behalf from the Collector or the Excise Commission er.
" The powers of the Government to reject a bid were thus reserved both under the provisions of law and by the express declarations made before the auction.
At any rate we do not find any basis for the creation of a right merely by making a bid.
The extent of the powers of the government in such matters has been indicated by this Court in State of Orissa and others vs Harinarayan Jaiswal and others (supra).
So long as these powers are not used in an unreasonable or mala fide manner, their exercise cannot be questioned.
In the cases before us, it could not be said that either the Gov ernment or any of its officers abused the power by acting either unreasonably or in a mala fide manner, and we find no justification for the argument that it was not permissi ble for the State Government to issue.the directions for reauction even when it found that the bids at the auction were unsatisfactory.
The High Court has taken the view that rule 103(1) of the Board 's Excise Rules regarding the manner of fixation and realisation 822 of the consideration for the grant of a license for the exclusive privilege of retail vend of country spirit was "incompetent and ultra vires the act.
" The High Court took that view under the mistaken impression that the State was not entitled to collect a tax "under the garb of a fee" and the "auction price for a license is not duty within the meaning of Entry 51 of List 11 of the Seventh Schedule to the Constitution.
" But, as has been shown, what was sought to be raised was consideration and not "fee".
The use of the expression "fees" in the rule is therefore inaccurate, but that cannot detract from the real nature of the recov ery.
Mr. S.C. Agarwal has challenged the validity of rule 103 on another ground, and we shall deal with it when we come to the judgment of the High Court dated April 16, 1971.
The next judgment of the High Court is that dated February 3, 1971, in O.J.C. No. 850 of 1970, which has given rise to civil appeal No. 209/of 1972 by the State of Orissa.
We have already stated the findings of the High Court in regard to it.
It has been argued by Mr. Govind Das that even if the State Government failed to specify the authority which was to determine the mode of determining the sum payable under sub section (1) of section 29, that could not be said to matter because it was the Collector, who was incharge of the administration of the Excise Department and Collection of the excise revenue under section 7 of the Act, who took the action to issue the auction notice for the grant of the license.
for the retail sale of country liquor.
Moreover, the State Government did not object to his authority to do so.
and, on the other hand, directed him to make a reauction merely on the ground of the insufficiency of the bids.
The Collector called for fresh.
tenders.
It was not in dispute before the High Court that the State Government issued a special order under section 29 by which it nominated itself to be the authority to determine the sufficiency of the sum payable under section 29(1) of the Act.
There is nothing in sub section (2)(b) to show that that was not permissible.
The other question in this respect is whether the fol lowing direction in the State Government 's order dated August 19, 1970 was valid, "It shall be at the discretion of the State Government to accept or reject any tender without assigning any reason therefor to order for calling of fresh tender or other wise as the case may be.
" It will be recalled that the High Court has taken the view that the order dated August 19, 1970 and the tender notice issued in pursuance thereof were bad in law and were liable to be quashed.
The High Court has taken the view that section 29(2)(a) did not authorise the exercise of "such absolute and naked power in determining the sum of money" as was sought to be done by the order dated August 19, 1970.
It appears to us however that the power to accept or reject a tender without assigning any reason cannot be said to be 823 arbitrary as section 29(2) (which has been amended with retrospective effect) itself provides.
that (i) it shall be exercised in the interest of the Excise revenue", (ii) by the specified authority, and (iii) under such control as may be specified.
As has been stated, the State Govern ment retained the power of accepting or rejecting the tender, or for calling of a fresh tender, to itself, and such an order cannot be said to be an "absolute" or "naked" power of the nature apprehended by the High Court.
Refer ence in this connection may be made to the decision in Jaiswal 's case (supra) mentioned above.
Moreover it is not disputed before us that the power to accept or not to accept the highest or any bid was expressly reserved under the impugned sale notification.
Sub section (2) of section 79 of the Act was also amended by the Bihar and Orissa Excise (Second Orissa Amendment) Act 1971 (Act 10 of 1971) with full retrospective effect.
Section 17 of the Act validated both the licenses granted and amounts paid or payable therefor, and its validity has not been challenged before us.
It will be remembered that Siba Prasad Saha had filed O.J.C. No. 786 of 1970 after the first judgment of the High Court dated May 15,1970, for refund of the license fee and for non payment of the fee in future.
The State of Orissa feels aggrieved against the decision of the High Court in that case dated April 16,1971 that a citizen has a fundamen tal right to deal in liquor.
In taking that view the High Court relied on this Court 's decision in Narula 's case (supra).
The decision in Narula 's case was considered and explained by this Court in Nashirwar 's care (supra) and it has been held as follows, "It is not correct to read in the deci sion in Narula 's case that there is a funda mental right to do business in liquor.
The decision is that dealing in liquor is busi ness and a citizen has a right to do business in that commodity and the State can impose reasonable restrictions on the right in public interest.
If the State can prohibit bussiness in liquor as is held in State of Bombay and Another vs
F.N. Balsara (1951 S.C.R.682) this establishes that the State has exclusive right of privilege of manufac ture, possession, sales of intoxicating liquor and therefore the Slate grants such a right of privilege to persons in the shape of license or lease." In reaching this conclusion this Court took note of the decision in Bharucha 's case(1) that there was no inherent right in a citizen to sell intoxicating liquors by retail, and that it is not a privilege of a citizen of the State, and observed that as Bharucha 's case was a Constitution Bench decision like Narula 's case, the latter could not be said to have overruled the former.
As has been stated, the matter again came up for consideration in Har Shankar 's case (supra) with specific reference to Narula 's case, and it was reiterated that "there is no fundamental right to do trade or business in intoxicants" and that "in all their mani festations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of 824 various forms of activities in relation to intoxicants.
" The contrary view of the High Court in impugned judgment is incorrect and must be set aside.
The other grievance of the appellant State is that the High Court struck down the expression "or otherwise" from clause (a) of subsection (2) of 29 of the Act as unconstitu tional.
We have given our reasons for the contrary view, and the High Court therefore went wrong in striking down the expression "or otherwise".
The High Court has also held that as sections 2 to 5 of the Amending Act of 1970 were not made retrospective in operation, the effect of section 6 amounted to a direction by the Legislature to the State to disregard the decision in Ajodhya Prasad 's case that the amount realised by auction was illegal and that section 6 was therefore ultra vires the powers of the Legislature.
It will be sufficient to say in this connection that the Bihar and Orissa Excise (Second Orissa Amendment) Act, 1971 (Act 10 of 1971) has made good the deficiency, if any, by stating that the amending provi sions shall be deemed always to have been so added or inserted or substituted.
In this respect also, the impugned judgment of the High Court must be rectified.
Mr. S.C. Agarwal has argued that the amount realised by the State for grant of the exclusive privilege under sec tions 22 and 29 was nothing but a tax and no such tax was permissible under Entries 45 to 63 of List II of the Seventh Schedule to the Constitution and that it was not excise duty within the meaning of Entry 51 or a fee under Entry 66.
It has also been argued that Entry 8 embodying the Police powers of the State could not be invoked to sustain such an imposition.
Mr. Bhagat has also argued that the collection was in the nature of a tax and section 29 was therefore ultra vires the Constitution.
Mr. Bhagat has also urged that the State was not the owner of the exclusive privilege to manufacture or sell liquor and that the Act did not empower it to part with that right on payment.
We have given our reasons already for taking a contrary view, with refer ence to.
the decisions in Nashirwar 's case and Har Shankar 's case.
The State has the exclusive right or privilege to manufacture, store and sell liquor and to grant that right to its license holders on payment of consideration, with such conditions and restrictions for its regulation as may be necessary in the public interest.
The argument to the contrary is futile and is rejected.
It has been argued by Mr. Agarwal that although the Amending Act of 1970 (Act 17 of 1970) was enacted for the purpose of getting over the High Court 's declaration in O.J.C.No.
357 of 1970 that rule 103 of the Board 's Excise Rules, 1965, in so far as it directs that fees for license for the retail vend of excisable articles shall be fixed by auction, was ultra vires the Act, rule 103 continued to remain invalid even after the promulgation of that Act because.
such a rule could not be made under section 90(7) of ' the Act.
Counsel has argued that as the rule was in valid, it was not permissible to hold the impugned public auction because that was not permissible under any other provision of the Act.
This argument is also futile because section 5 of the Bihar and Orissa Excise (Second Orissa Amendment) 10 of 1971) has substituted a new sub section (2) for the old sub section as follows, providing for auction, and it has been stated that it shall be "deemed always to have been substituted". "(2) The sum payable under sub section (1) shall be determined as follows, (a) by auction or by calling tenders or other wise as the State Government may, in the interest of excise revenue by general or special order direct." Then follow other clauses with which we are not concerned.
Moreover section 17 of that Act has validated all grants made by way of licenses for manufacture and retail sale of country liquor in respect of any place on or after the 7th day of August, 1965, on which date the Board 's Excise Rules (including rule 103) admittedly came into force.
In this view of the matter, it is not necessary for us to examine the other arguments of Mr. Agarwal Which have been adopted by Mr. Bhagat regarding the invalidity of rule 103.
It is not necessary to deal separately with the judgment of the High Court dated April 16, 1971 in O.J.C. No. 242 of 1967, which has given rise to civil appeal No. 2071 of 1972, or with its decision dated May 7, 1971 in O.J.Cs.
No. 1185 1190, 1223, .1224 and 1226 of 1970 (which has given rise to civil appeals Nos.
1855 1863 of 1972 and cross appeals Nos.
351 359 of 1972) because they are based on the afore said decision dated April 16, 1971 in O.J.C. No. 786 of 1970.
So also, it is not necessary to deal separately with the decision dated September 6,1971 in O.J.C.No. 859 of 1970 and 863 of 1970 which have given rise to civil appeals Nos. 1235 and 1236 of 1972, for the same reason.
This takes us to the judgment of the High Court dated March 28, 1974 in O.J.C.No.589 of 1972 which has given rise to civil appeal No. 1802 of 1974.
That decision is based on the decision dated January 3,1974 in O.J.C.No.
1036 of 1971.
The petitioner in that case was a licensee for the retail sale of country liquor in Mayurbhanj district.
He chal lenged the vires of sections 22 and 29 of the Act and claimed that the monthly consideration for the license was not due from him and that he was entitled to a refund of the money already paid by him.
The High Court followed that decision and dismissed the writ petition.
In doing so it relied on its decision dated April 16, 1971 in Siba Prasad Saha vs State of Orissa and other (I.L.R. 1971 Cut tack 777) and the decision of this Court in Jaiswal 's case (supra) and dismissed the petition.
We have already dealt with the points which arise for consideration in this case while examining the earlier cases and we see nothing wrong with the impugned judgment of the High Court by which the writ petition has been dismissed.
In the result, we order as follows, Civil Appeals Nos.
1892 and 1893 of 1971 are allowed, the impugned judgment of the High Court dated May 15,1970 is set aside and writ petitions Nos.
O.J.C. 329 and 357 of 1970 are dismissed.
826 Civil Appeal No. 2091 is allowed, the impugned judgment of the High Court dated February 3, 1971 is set aside and the writ petition No. 850 of 1970 is dismissed.
Civil Appeal No. 1302 of 1972 is allowed, the 'impugned judgment of the High Court dated April 16, 1971 is set aside and the writ petition No. 786 of 1970 is dismissed.
Civil Appeal No. 2071 of 1972 is allowed, the impugned judgment of the High Court dated April 16, 1971 is set aside and the writ petition No. O.J.C. 242 of 1967 is dismissed.
Civil Appeals Nos.
1855 1863 of 1972 are allowed, the impugned judgments of the High Court dated May 7, 1971 are set aside and O.J. Cs.
1185 1190, 1223, 1224 and 1226 of 1970 are dismissed.
Cross appeals Nos.
351 359 of 1972 are dismissed.
Civil Appeals Nos. 1235 and 1236 of 1972 are allowed, the impugned judgments of the High Court dated September 6, 1971 are set aside and O.J. Cs.
Nos. 859 and 863 of 1970 are dismissed.
Civil Appeal No. 1802 of 1974 fails and is dismissed.
In the circumstances of these cases there will be no order as to he costs.

summary:
Section 22(1) of the Bihar & Orissa Excise Act, 1915, provides that the States may grant to any person on such conditions and for such periods as it may think fit, the exclusive privilege of manufacturing or selling in retail count try liquor.
The proviso provides that a public notice shall be given of the intention to grant such exclu sive privilege and that a decision would be taken after considering objections.
Sub section (2) provides that no grantee of such a privilege shall exercise it unless or until he has received a licence in that behalf from the Collector or the Excise Commissioner.
In the present case the Collector issued a notice in form GL 10 relating to the auction of the right to open a liquor shop at the site named in the notice and the payment of the licence fee therefor.
The respondent was a success ful bidder at the auction.
He deposited the money under r. 103 of the Excise Rules but the Government did not grant him the licences.
In a writ petition filed by the respond ent the State Government alleged that the bids at the auc tion were not satisfactory and that in the interest of revenue the State Government did not accept the bids.
The High Court held (i) that the State Government had no power to interfere with the auction held by the Collector after it had become final and could not direct reauction and (ii) that the realisation at the auction was not a fee but a tax not contemplated by the Act and that the auction price for a licence was not excise duty within the meaning of Entry 51 of List II and hence r. 103(1) of the Rules providing for fixation of licence fee by auction was in excess of the rule making power of the Board.
The High Court also held that what was purported to be given under the sale notice of the Collector was not the grant of exclusive privilege under section 22.
By the Bihar & Orissa Excise (Orissa Amendment Ordi nance) 1970 which later became the Act, section 29(2) was amend ed.
The State Government issued an order for fresh settle ment of the shops and the Collector accordingly called for tenders.
In the respondent 's writ petition the High Court held that the State Government 's order was invalid as the author ities for fixing the procedure.
under section 29(2) as amended had not been specified and the order left it to the uncon trolled discretion of the authority concerned to accept or reject any tender and to determine the adequacy of the amount offered in the tender.
The State Government 's order and the Collector 's tender notice were quashed and the Collector was directed to issue licence to the respondent.
The High Court accordingly held that the respondent was entitled to the grant of the exclusive privilege under section 22 because he was the highest bidder in the auction.
The High Court also held in a petition filed by another respondent, that in so far as section 29(2) provided that the sum payable under sub section
(1) thereof shall be determined "other wise" than by calling tenders or by auction it was uncon stitutional; that portion of section 29(2).
should, therefore, be struck down: that section 6 of the Amending Act, 1970 was ultra vires as there was exercise of judicial power by the legis lature and, therefore, the licence fee collected by the State was illegal; but that as the respondent had already enjoyed the benefit of the licence and voluntarily partici pated in the auction he wag not entitled to its refund.
3 1338S.C.I./76 812 Therefore the Second Amendment Act, 1971 was passed.
The vires of the amended sections 21 and 29 was challenged in writ petitions but the High Court dismissed them.
In appeals to this Court, HELD: (1) The provisions of the Act and the express declarations make clear that the State Government had the power to reject a bid.
In any event no right is created in the bidder by making a bid.
The administration of the Excise Department and the collection of revenue within the district vest in the Collector.
It is not correct to say that the notice issued by the Collector in form GL 10 was sufficient to show that the exclusive privilege for retail sale of country liquor was not proposed to be given to the successful bidders at the auction.
The High Court erred in holding that a condition regarding the opening of additional shops was inserted in the Form. ; 820E] (b) It has been held by this Court that the State has the exclusive right or privilege of manufacturing and sell ing liquor.
The State grants such right or privilege in the shape of a licence or a lease.
The State has the power to hold, a public auction for grant of such right or privilege and accept payment of a sum in consideration of grant of lease, that the amount payable by the bidders as licensees was neither a fee in the technical sense nor a tax, but was in the.
nature of price of a privilege and that auctions were only a mode or medium for ascertaining the best price obtainable thereof.
Therefore, the right granted to the bidders by public auction and the licences issued to them was clearly an exclusive privilege within the meaning of section 22(1 ) of the Bihar Act and it was expressly provided in section 29 that it would be permissible for the State not to accept payment of a sum in consideration of the grant of the exclusive privilege.
[819 H; 820A D] Nashirwar etc.
vs The State of Madhya Pradesh ; ; Hat Shankar & ors.
vs The Dy.
Excise and Taxa tion Commissioner & ors.
; ; Thakur Prasad Sac & ors.
vs The Member, Board of Revenue & ors. ; State of Orissa & ors.
vs Harinarayan Jaiswal & ors. ; applied.
(c) The view of High Court that after the acceptance of the bid the Collector should have issued the licence and that he committed an illegality in ordering reauction pre supposes that a binding obligation had come into existence in favour of the bidder by accepting a deposit from him even though this was done on the express condition that it was tentative and was not an acceptance of his bid.
In the peculiar facts and circumstances of the auction, the bids were nothing more than offers in response to an invitation to make tenders and such auctions were the mode.
of ascer taining the highest offers.
The basic conditions for the emergence of rights through offers or conditions made and accepted and acted upon by paying any specified or agreed price as consideration were wanting in this case.
The express and advertised terms of.
the auction made it clear that the money tendered was to be deemed to be deposited tentatively, pending the acceptance of the bid.
The bids were neither offers nor acceptance ' by the Government.
They were only offers by the bidders.to purchase the rights.
The essentials of an agreement and mutuality of obligations were absent altogether.
Since auction is only a mode of ascer taining the highest offer, the State Government can deter mine the sum payable by any other method and hence.
the High Court was wrong in striking down the expression "other wise" from section 29(2)(a).
[820 H; 821 A C] (d) These auctions are not ordinary auctions where a binding agreement could be deemed to be concluded at the fall of the.hammer, creating mutually enforceable obliga tions but.
are a means for ascertaining the highest offers for the exclusive privileges which the Government alone could grant for carrying on a trade or business considered noxious under the law, and which, because of its special character, could be regulated m any way or even prohibited altogether by the Government.
This special character of the trade or business would appear from the power of the State Government to grant the exclusive privilege to carry on trade m the manufacture and sale of liquor.
[821 F G] (e) There is no justification for the argument of the.
respondents that it was not permissible for the State Gov ernment to issue directions for reauction even when it found that the bids at the auction were unsatisfactory.
So long as the powers of the Government to reject a bid are not used in an unreasonable or mala fide manner, their exercise cannot be questioned [821 G] 2(a) The High Court 's view that r. 103(1) was ultra.
vires was taken under the mistaken impression that the State was collecting a tax under the garb of a fee and that the auction price for a licence could not be treated as duty within the meaning of Entry 51, List II of the Seventh Schedule.
But what was sought to be raised was considera tion and not fee.
The use of the expression " 'fees" in the rule is inaccurate but that:cannot detract from the real nature of the recovery.
[822 A B] (b) The argument of the respondent that r. 103 continued to remain invalid even after the promulgation of the Amend ment Act is not correct because section 5 of the Second Amendment Act has substituted a new sub section
(2)for the old subsection providing for auction and this sub section stated that it shall be deemed always to have been substituted".
Section 17 has validated all grants made by way of licences for manufacture and retail sale of country liquor and the amounts paid or payable therefor.
[824 G H; 825 C] (c) The power to accept or reject a tender without assigning any reason cannot be said to be arbitrary as section 29(2) (which has been amended with retrospective effect) itself provides that (i) it shall be exercised in the inter est of the Excise revenue, (ii) by the specified authority and (iii) under such control as may be specified.
In the instant case the 'State Government retained the power of accepting or rejecting the tender or for calling of a fresh tender, to itself, and such an order cannot be said to be an absolute or naked power of the nature apprehended by the High Court.
Moreover, the power to accept or reject the highest o,r any bid was expressly reserved under the im pugned sale notification.
[823 A C] (3) Even though no authority was specified for taking action under section 29(1) it was the Collector who is in charge of the Excise Administration that took action in the present case and his action was approved by the State Gov ernment.
Moreover, the State Government issued a modified order under section 29 nominating itself as the authority to determine the sufficiency of the.
sum payable.
[822 D] (4) It has been held by this Court that there is no fundamental right to do trade or business in intoxicants and that in all their manifestations these rights are vested in the State and without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants.
There is no inherent right in a citizen to sell intoxicating liquors by retail.
[823 H] Krishan Kumar Narula etc.
vs The State of J & K & ors ; ; Nashirwar etc.
vs The State of M.P. ; ; Har Shankar & ors.
vs The Dy.
Excise & Taxation Commissioner & ors.
; ; Coovetlee Bharucha vs The Excise Commissioner ; fol lowed.
(5) Since the Bihar & Orissa Excise (Second Orissa Amendment) Act, 1971 has made good the deficiency, if any, by stating that the amending provisions in sections 2 to 5 of the Amending Act, 1970 shall be deemed always to have been so added or inserted or substituted, the High Court was wrong in holding that there was any exercise of judicial power by 'the Legislature.
[824 C D]


judgement:
ivil Appeal Nos.
572 574 and 575 of 1972.
(Appeals by Special Leave from the Judgment and Order dated 13 7 1971 of the Kerala High Court in Tax Revision Cases Nos. 42, 45, 58 and 44 of 1970.) S.V. Gupte (In CA No. 572/72), K. M, K. Nair and A. C.I Pudissery for the appellant in all the appeals T. A. Ramachandran, for the respondents in all the appeals.
The Judgment of P.N. Bhagwati and R.S. Sarkaria, JJ. was delivered by Bhagwati, J., section Murtaza Fazal Ali, J. gave a separate opinion.
BHAGWATI, J.
The facts giving rise to these appeals are set out in the judgment about to be delivered by our learned brother section Murtaza Fazal Ali and we do not think it necessary to reiterate them.
So far as Civil Appeals 572 574 of 1972 are concerned, it would be sufficient to state briefly the following facts as these are the only facts necessary for appreciating the question of law which arises for determination in these appeals.
In the assessments of the assessee to sales tax for three assessment years.
the returns filed by him on the basis.
of his books of account appeared to the Sales Tax Officer to be incorrect and incomplete since certain sales appearing in the books of account of one Haji P.K. Usmankutty as having been effected by the assessee in his favour were not accounted for in the books of account maintained by the assessee.
The assessee applied to the Sales Tax Officer for affording him an oppor tunity to cross examine Haji Usmankutty in regard to the correctness of his accounts, but this opportunity was denied to him and the Sales Tax Officer proceeded to make a best judgment assessment under section 17, sub section (3) of the Kerala General Sales Tax, 1963.
The assessee ap pealed but without success and this was followed by a revi sion application to 236 the High Court.
The High Court took the view that the assessee was entitled to an opportunity to cross examine Haji Usmankutty before any finding could be arrived at by the Sales Tax Officer that the returns filed by the assessee were incorrect and incomplete so as warrant the making of 'the best judgment assessment and since no such opportunity had been given to the assessee, the High Court quashed the order of the Sales Tax authorities and remanded the case to the Sales Tax Officer for making fresh assessments according to law after giving an opportunity to the assessee to cross examine Haji Usmankutty.
The facts in Civil Appeal No. 575 of 1972 are almost identical, save that instead of Haji Usmankutty, certain wholesale dealers were sought to be cross examined in that case and the opportunity to cross examine them was denied by the Sales Tax authorities.
Since the High Court quashed the orders of assessments in both cases, the State preferred an appeal by special leave in each case challenging the correctness of the view taken by the High Court.
Now, the law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi judicial functions and they are bound to observe principles of natural justice in reaching their conclusions.
It is true, as pointed out by this Court in Dhakeswari Cotton Mills Ltd. vs Commissioner of Income Tax, West Bengal(1) that a taxing officer "is not lettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law", but that does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law as principles of natural justice.
It is, however, necessary to remember that the rules of natural justice are not a con stant: they are not absolute and rigid rules having univer sal application.
It was pointed out by this Court in Suresh Koshy George vs The University of Kerala & Ors.(2) that "the rules of natural justice are not embodied rules" and in the same case this Court approved the following observations from the judgment of Tucker, L.J. in Russel vs Duke of Norfolk and Ors.(3): "There are in my view, no words which are of universal application to every kind of inquiry and every kind of domestic tribunal.
The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, and so forth.
Accordingly, 1 do not ' derive much assistance from the definitions of natural justice which have been from time to time used, but, whatev er standard is adopted, one essential is that the person concerned should have a reasonable opportunity of presenting his case.
" One of the rules which constitutes a part of the prin ciples of natural justice is the rule of audi alterem partera which requires that (1) ; (2) ; (3) [1949] 1 All.
England Reports 108.
237 no man should be: condemned unheard.
It is indeed a re quirement of the duty to act fairly which lies on all quasi judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences or affecting rights of parties because, as pointed out by this Court in A.K. Kraipak and Ors.
vs Union of India,(1) "the aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice" and justice, in a society which has accepted socialism _as its article of faith in the Constitu tion, is dispensed not only by judicial or quasi judicial authorities but also by authorities discharging administra tive functions.
This rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is also, like the genus of which it is a species, not an inflexible rule having 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 constitu tion of the authority holding the inquiry, the nature and character of the rights affected and the consequences flow ing from the decision.
It iS, therefore, not possible to say that in every case the rule of audi alterem partem requires [that] a particular specified procedure to be followed.
It may be that in a given case the rule of audi alterem partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the in quiry should be permitted to be cross examined by the party affected while in some other case it may not.
The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case.
Now, in the present case, we are not concerned with a situation where the rule of audi alterem partem has to be read _into the statutory provision empowering the taxing authorities to assess the tax.
Section 17, sub section (3), under which the assessment to sales tax ha 's been made on the assessee provides as follows: "If no return is submitted by the dealer under subsection (1) within the pre scribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing author ity shall, after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment: Provided that before taking action under this sub section the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such return.
" It is clear on a plain natural construction of the language of this provision that it empowers the Sales Tax Officer to make a best judgment assessment only where one of two condi tions is satisfied: (1) 238 either no return is submitted by the assessee or the return submitted by him appears to the Sales Tax Officer to be incorrect or incomplete.
It is only on the existence of one of these two conditions that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment.
The ful filment of one of these two pre requisites is, therefore, a condition precedent to the assumption of jurisdiction by the Sales Tax Officer to make assessment to the best of his judgment.
Now, where no return has been submitted by the assessee, one of the two conditions necessary for the applicability of section 17, subsection (3) being satisfied, the Sales Tax Officer can, after making such inquiry as he may consider necessary and after taking into account all relevant materials gathered by him, proceed to make the best judgment assessment and in such a case, he would be bound under the proviso to give a reasonable opportunity of being heard to the assessee.
But in the other case, where a return has been submitted by the assessee, the Sales Tax Officer would first have to satisfy himself that the return is incorrect or incomplete before he can proceed to make the best judgment assessment.
The decision making process in such a case would really be in two stages, though the in quiry may be continuous and uninterrupted: the first stage would be the reaching of satisfaction by the Sales Tax Officer that the return is incorrect or incomplete and the second stage would be.
the making of the best judgment assessment.
The first part of the proviso which requires that before taking action under sub section (3) of section 17, the assessee should be given a reasonable opportunity of being heard would obviously apply not only at the second stage but also at the first stage of the inquiry, because the best judgment assessment, which is the action under section 17, sub section (3), follows upon the inquiry and the "reasonable opportunity of being heard" must extend to the whole of the inquiry, including both stages.
The requirement of the first part of the proviso that the asses see should be given a "reasonable opportunity of being heard" before making best judgment assessment merely em bodies the audi alterem partem rule and what is the content of this opportunity would depend, as pointed out above, to a great extent on the facts and circumstances of each case.
The question debated before us was whether this opportunity of being heard granted under the first part of the proviso included an opportunity to cross examine Haji Usmankutty and other wholesale dealers on the basis of whose books of accounts the Sales Tax Officer disbelieved the account of the assessee and came to the finding that the return submit ted by the assessee were incorrect and incomplete.
But it is not necessary for the purpose of the present appeals to decide this question since we find that in any event the assessee was entitled to this opportunity under the 'second part of the proviso.
The second part of the proviso lays down that where a return has been submitted, the assessee should be given a reasona ble opportunity to prove the correctness or completeness of such return.
This requirement obviously applies at the first stage of the enquiry before the Sales Tax Officer comes to the conclusion that the return submitted by the assessee is incorrect or incomplete so as to warrant the making of a best judgment assessment.
The question is what is the content 239 of this provision which imposes an obligation on the Sales Tax Officer to give and confers a corresponding right on the assessee to be afforded, a reasonable opportunity "to prove the correctness or completeness of such return".
Now, obviously "to prove" means to establish the correctness ,or completeness of the return by any mode permissible under law.
The usual mode recognised by law for proving a fact is by production of evidence and evidence includes oral evi dence of witnesses.
The opportunity to prove the correct ness or completeness of the return would, therefore, neces sarily carry with it the right to examine witnesses and that would include equally the right to Cross examine witnesses examined by the Sales Tax Officer.
Here, in the present case, the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the book 's of account of the assessee.
The Sales Tax Officer relied on the evi dence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete.
Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other whole sale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the assessee could not do, unless he was given an opportunity of cross examining Hazi Usmankutty and other wholesale dealers with reference to their accounts.
Since the evidentiary material procured from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incor rect and incomplete, the assessee was entitled to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross examination.
It can hardly be disputed that cross examination is one of the most efficacious methods of establishing truth and exposing falsehood.
Here, it was not disputed on behalf of the Revenue that the assessee in both cases applied to the Sales Tax Officer for summoning Hazi Usmankutty and other wholesale dealers for cross examina tion, but his application was turned down by the Sales Tax Officer.
This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross examination by the assessee clearly constituted in fraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee.
We do not wish to refer to the decisions of various High Courts on this point Since our learned brother has dis cussed them in his judgment .
We are of the opinion that the view taken by the Orissa High Court in Muralimohan Prabhudayal vs State of Orissa(1) and the Kerala High Court in M. Appukutty vs State of Kerala(2) and the present cases represents the correct law on the subject.
We accordingly dismiss the appeals with no order as to costs.
(1) 26 S.T,C, 22.
(2) 14 S.T.C, 489.
240 FAZAL ALl, J.
These appeals by special leave involve an interesting question of law as to the interpretation of section 17(3) of the Kerala General Sales Tax, 1963 hereinafter referred to as 'the Act ' and the proviso thereof read with r. 15 framed under the Act.
The assessment years in question are 1965 66, 1966 67 and 1967 68.
in the case of the re spondent K.T. Shaduli in Civil Appeals Nos. 572 574 of 1972 and 1967 68 in the case of Nallakandy Yusuff in Civil Appeal No. 575 of 1972.
But both the cases involve an identical question of law.
In this view of the matter, we propose to deal with all these appeals by one common judg ment.
The assessee in Civil Appeals Nos.
572 574 of 1972 filed his sales tax returns before the Sales Tax Officer who on an examination of .the accounts found that the returns submit ted by the assessee were both incorrect and incomplete inasmuch as certain entries in the books of account of Haji P.K. Usmankutty revealed Certain transactions which were not accounted for in the assessee 's book 's of account.
The Sales Tax Officer, after hearing the assessee, made an assessment to the best of his judgment under section 17(3) of the Act read with r. 15 made under the Act.
The Sales Tax Officer thus rejected the accounts of the assessee as they did not re flect the goods said to have been purchased by Haji P.K. Usmankutty.
The assessee sought an opportunity to cross examine Haji Usmankutty with respect to the correctness of his accounts which were relied upon by the Sales Tax Offi cer, but this opportunity was refused to him by the Sales Tax Officer as also the other appellate authorities.
Simi larly in the case of the respondent Nallakandy Yusuff, in Civil Appeal No. 575 of 1972, the return filed by the asses see was rejected by the Sales Tax Officer on the ground that certain transactions shown in the accounts of some wholesale dealers were not reflected in his books of account and the opportunity asked for by the assessee for cross examining the said wholesale dealers was refused to him.
The order of the Sales Tax Officer was confirmed by the Appellate Author ities under the Act.
Both the assessees then filed a revi sion application before the High Court which allowed the application of the assessees, quashed the orders of the Sales Tax Authorities and remanded the cases to the Sales Tax Officer for giving an opportunity to the respondents for cross examining the wholesale dealers concerned and then making assessments in accordance with the law.
The State having obtained special leave from this Court hence these appeals before us.
The short question that fell for determination before the High Court was, whether under the provisions of the Act the opportunity of being heard which was to be given to the assessees, would include within its sweep the right of cross examination of a third party whose accounts were the basis of the best judgment assessments made by the Sales Tax Officer and the examination of which later on showed that the returns filed by the assessees were incorrect and incom plete.
The High Court, on a consideration of section 17(3) and the Rules made under the Act came to the conclusion that the assessees were entitled to a fair hearing and the opportuni ty of being heard could not be said to be complete unless in the circumstances of these cases the as 241 sessees were allowed to cross examine Haji P.K. Usmankutty and other wholesale dealers on whose accounts reliance was placed by the Sales Tax Authorities.
A provision of law authorising the Taxing Authorities to make a best judgment assessment in default of the assessee complying with the legal requirements is not a new one, but existed in section 23(4) of the Income tax Act, 1922 as amended by the Indian Income tax (Amendment) Act, 1939, the relevant part of which runs thus: If any person fails to make the return required by any notice given under sub section (2) of section 22 and has not made a return or a revised return under sub section (3 ) of the same section or fails t6 comply with all the terms of a notice issued under sub section (4) of the same section or, having made a return, fails to comply with all the terms of a notice issued under sub section (2) of this section, the Income tax Officer shall make.
the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment and, in the case of a firm, may refuse to register it or may cancel its registration if it is already registered: Provided x x x x" Describing the nature and character of a best judgment assessment, Lord RuSsell of Killowen in delivering the judgment of the Privy Council in Income tax Commissioner vs Badridas Ramrai Shop, Akola,(1) observed as follows: "The Officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying informa tion.
He must not act dishonestly or _vindic tively or capriciously, because he must exer cise judgment in the matter.
He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him.
in arriving at a fair and proper estimate; and though there must necessarily be guess work in the matter, it must be honest guess work." These observations were quoted with approval by this Court in Raghbar Mandal Harihar Mandal vs State of Bihar(2).
Mr. Gupte learned counsel for the appellant submitted that the main object of the best judgment assessment was to pena lise the (1) (1937) 64 IA.
102, 114 115.
(2) 8 S.T.C.770.
242 assessee for either not filing a return or for filing a return which was defective and if at this stage he is given a full fledged 'hearing including the right to summon and cross examine witnesses, then this would amount to condoning the default committed by the assessee.
It was also argued that as the Income tax authorities are not bound by the technical rules of evidence, the assessee cannot claim cross examination of witnesses as a matter of right.
In support of his submission he relied upon a decision of this Court in Dhakeswari Cotton Mills Ltd vs Commissioner of Income Tax, West Bengal(1), where agreeing with a similar argument put forward by the Solicitor General in that case this Court observed thus: "As regards the second contention, we are in entire agreement with the learned Solici tor General when he say 's that the Income tax Officer is not lettered by technical rules of evidence and pleadings, and that he is entitled to action material which may not be accepted as evidence in a Court of law, but there the agreement ends, because it is equal ly clear that in making the assessment under sub section (3) of section 23 of the Act, the Income tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all.
There must be something more than bare suspicion to support the assessment under section 23 (3).
" There can be no doubt that the principle that as the tax proceedings are of quasi judicial nature, the Sales Tax authorities are not strictly bound by the rules of evidence which means that what the authorities have to consider is merely the probative value of the materials produced before them.
This is quite different from saying that even the rules of natural justice do not apply to such proceedings so as to deny the right of cross examination to the assessee where the circumstances clearly justify such a course and form one of the integral parts of the materials on the basis of which the order by the Taxing Authorities can be passed.
The admissibility of a document or a material in evidence is quite different from the value which the authority would attach to such material.
The Privy Council has held that the Taxing Authorities can even base their conclusion on their private opinion or assessment provided the same is fully disclosed to the assessee and he is given an opportu nity to rebut the same.
In these circumstances, therefore, we do not agree with Mr. Gupte that merely because the technical rules of evidence do not strictly apply, the right of crossexamination cannot be demanded by the assessee in a proper case governed by a particular statute.
This Court further fully approved of the four proposi tions laid down by the Lahore High Court in Seth Gurmukh Singh vs Commissioner of Income tax, Punjab(2).
This Court was of the opinion that the Taxing Authorities had violated certain fundamental rules of (1) ; (2) 243 natural justice in that they did not disclose to the asses see the information supplied to it by the departmental representatives.
This case was relied upon by this Court in a later decision in Raghubar Mandal Harihar Mandal 's case (supra) where it reiterated the decision of this Court in Dhakeswari Cotton Mills Ltd. 's case (supra), and while further endorsing the decision of the Lahore High Court in Seth Gurmukh Singh 's case(") pointed out the rules laid down by the Lahore High Court for proceeding under sub section
(3) of section 23 of the Income tax Act and observed as follows: "The rules laid down in that decision were these: (1 ) While proceeding under sub section (3) of section 23 of the Income tax Act, the Income tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of the evidence, oral or documentary, led by the assessee, he should in fairness disclose to the assessee the material on which he is going to found that estimate; (3) he is not however debarred from relying on private sources of informa tion, which sources he may not disclose to the assessee at all; and (4) in case he proposes to use against the assessee the result of any private inquiries made by him, he must commu nicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it, if possible.
" It will thus be noticed that this Court clearly laid down that while the Income tax Officer was not debarred from relying on any material against the assessee, justice and fair play demanded that the sources of information relied upon by the Income tax Officer must be disclosed to the assessee so that he is in a position to rebut the same and an opportunity should be given to the assessee to meet the effect the aforesaid information.
We, however, find that so far as the present appeals are concerned, they are governed by the provisions of the Kerala General Sales Tax Act, the provisions of which are not quite identical with the provisions of the Income tax Act and the Kerala Act appears to have fully incorporated all the essen tial principles of natural justice in section 17(3) of the Act.
In these circumstances, therefore, the answer to the ques tion posed in these appeals would have to turn upon the scope, interpretation and content of section 17(3) of the Act, the proviso thereto and r. 15 framed under the Act.
It is true that the words "opportunity of being heard" are of very wide amplitude but in the context the sales tax pro ceedings which are quaSi judicial proceedings all that the Court has to see is whether the assessee has been given a fair hearing.
Whether the hearing would extend to the right of demanding cross examination of witnesses or not would naturally depend upon the nature of the materials relied upon by the sales tax 244 authorities, the manner in which the assessee can rebut those materials and the facts and circumstances of each case.
It is .difficult to lay down any hard and fast rule of universal application.
We would, therefore, first try to interpret the ambit of section 17(3) and the proviso thereof in order to find out whether a right of cross examination of witnesses whose accounts formed the basis of best judgment assessment is conferred on the assessee either expressly or by necessary intendment.
Section 17(3) of the Act runs thus: "If no return is submitted by the dealer under subsection (1) Within the prescribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing author ity shall, after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment: Provided that before taking action under this sub section the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such re turn.
" An analysis of this provision would show that this sub section contemplates two contingencies (1) where the asses see does not file his return at all; and (2) where the assessee files his return which, however, is found to be incorrect or incomplete by the assessing authority.
The sub section further enjoins on the assessing authority a duty to consider the necessary materials and make an enquiry before coming to its conclusion.
The proviso expressly requires the assessing authority to give to the assessee a reasonable opportunity of being heard even if the assessee had committed default in not filing the return.
Since the statute itself contemplates that the assessee should be given a reasonable opportunity of being heard, we are not in a position to agree with the contention of the learned counsel for the appellant that if such an opportuni ty is given, it will amount to condonation of default of the assessee.
The tax proceedings are no doubt quasi judicial proceedings and the Sales tax authorities are not bound strictly by the rules of evidence, nevertheless the authori ties must base their order on materials which are known to the assessee and after he is given a chance to rebut the same.
This principle of natural justice which has been reiterated by this Court in the decisions cited above has been clearly incorporated in section 17 (3) of the Act as men tioned above.
The statute does not stop here, but the second part of the proviso confers express benefit on the assessee for giving him an opportunity not only of being heard but also of proving the correctness or completeness of such return.
In view of this provision it can hardly be argued with any show of force that if the assessee desires the wholesale dealers whose accounts are used against him to be cross examined in order to prove that his return is not incorrect or incomplete he should not be conceded this opportunity.
Apart from anything else, the second part of the proviso itself confers this specific right on the asses see.
It is difficult to conceive as to how the 245 assessees would be able to disprove the correctness of the accounts of Haji P.K. Usmankutty or the other wholesale dealers, unless he is given a chance to cross examine them with respect to the credibility of the accounts maintained by them.
It is quite possible that the wholesale dealers may have mentioned certain transactions in their books of account either to embarrass the assessees or due to animus or business rivalry or such other reasons which can only be established when the persons who are responsible for keeping the accounts are brought before the authorities and allowed to be croSs examined by the assessees.
This does not mean that the assessing authority is bound to examine the whole sale dealers as witnesses in presence of the assessees: it is sufficient if such wholesale dealers are merely ten dered by the sales tax authorities for cross examination by the assessees for whatever worth it is.
In view of the express provision of the second part of the proviso, we are fully satisfied that the respondents had the undoubted right to crosS examine the wholesale dealers on the basis of whose accounts the returns of the assessees were held to be incor rect and incomplete.
We are fortified in our view by a decision of this Court in C. Vasantilal and Co. vs Commis sioner of Income tax, Bombay City(1), where this Court observed as follows: "The Income tax Officer is not bound by any technical rules of the law of evidence.
It is open to him to collect materials to facilitate assessment even by private enquiry.
But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it.
" It will be noticed that if the Sales tax authorities refused the prayer of the assessees to cross examine the wholesale dealers, then such refusal would not amount to an adequate opportunity of explaining the material collected by the assessing authority.
Mr. Gupte learned counsel for the appellant relied on a decision of the Gujarat High Court in Jayantilal Thakordas vs Stale of Gujarat(2).
In the first place the Gujarat High Court in that case was concerned with the Bombay Sales Tax Act which did not contain any .express provision like the one which is to be found in the second part of the proviso to s.17(3) of the Kerala General Sales Tax Act and, there fore, any decision given by the Gujarat High Court would have no application to the facts of the present appeals.
In Jayantilal Thakordas 's case (supra) the Court was merely called upon to interpret the import of the words "reasonable opportunity of being heard" and the Judges held that as ample opportunity was given to the assessee therefore concerned to show cause why the sales said to have been suppressed (1) , 209.
(2) 23 S.T.C. 11.
(3) 14 S.T.C. 489.
246 by him should not be included in his turnover, the rules of natural justice were duly complied with.
The Court further pointed out that the sales tax authorities were not strictly bound by the rules of evidence nor did the Act require the assessing authorities to do more than what they had done in that case.
The Gujarat High Court seems to have dissent ed from the view taken by a single Judge of the Kerala High Court in M. Appukutty vs State of Kerala(3).
Finally, it does not appear from the facts mentioned in the judgment of the Gujarat High Court that the assessee had at any time made a specific prayer for cross examining the representa tives of the firm of M/s A. Alibhai & Co. In these circum stances, therefore, Jayantilal Thakordas 's case (supra) does not appear to be of any assistance to the appellant.
We might, however, state that we are not prepared to go to the extent to which the Gujarat High Court has gone even in interpreting the content and ambit of an opportunity given to the assessee of being heard so as to completely exclude the right of cross examination.
We have already held that whether the reasonable opportunity would extend to such a right would depend upon the facts and circumstances of each case.
We feel that the correct law on the subject has been laid down by a Division Bench of the Orissa High Court in Muralimohan Prabhudayal vs State 07 Orissa(1) where the High Court, while adumbrating the 4th proposition, namely, as to how the assessee was to rebut the. , material used by the Department against him, observed as follows: "It is the amplitude and ambit of this fourth proposition which needs examination.
There cannot be any controversy that the assessee can adduce independent evidence of his own to disprove the particulars proposed to be used against him . .
A third party 's accounts are proposed to be used against the assessee and if such accounts are relied on, the assessee 's accounts are to be discarded . .
If the assessee gets an opportunity by cross examination, he can establish that the accounts of the third party are wrong and manipulated to suit the interest of the third party, or that they were intended to be adversely used against the assessee with whom the third party had inimical rela tionship.
It is difficult to accept the contention in such a case, that the ample and reasonable opportunity to be given to the assessee would not include within its sweep the right of cross examination." The High Court in the present appeals has relied on its earlier decision in Appukutty vs State of Kerala (supra) where a single Judge of the Kerala High Court pointed out that the fact that a third party maintaining some secret accounts had made certain entries in his accounts which may connect the assessee will not give jurisdiction to the assessing authority to use that information unless the assessee has been (1) 26 S.T.C. 22.
247 given an opportunity to Cross examine him effectively.
As no such opportunity was given, the Court held that the proceedings stood vitiated.
In our opinion, the decision of the Kerala High Court was substantially correct and in consonance with the language of section 17(3) and the proviso thereto.
Other cases have also been cited before us which, howev er, are based on the peculiar language of the statutes which the Courts were construing and which are different from the language used in the Act.
Finally, apart from the provisions of section 17(3.) and the proviso thereto, the rules further reiterate what the provi so contemplates.
Rule 15 which deals with provisional as sessment where a return is incorrect and incomplete runs thus: "If the return submitted by the dealer appears to the assessing authority to be incorrect or incomplete, the assessing author ity shall, after issuing a notice to the dealer calling upon him to produce his ac counts to prove the correctness or complete ness of his return at time and place to be specified in the notice and after scrutiny of all the accounts if any, produced by the dealer and after taking into account all relevant materials gathered by it determine the turnover of the dealer to the best of its judgment, and fix provisionally the annual tax or taxes payable at the rate or rates speci fied in Section or notified under Section 10.
Before determining the turnover under this rule, the dealer shall be given a reasonable opportunity of being heard and also to prove the correctness or completeness of the return submitted by him.
" The Rule clearly shows that where the return of the assessee is incorrect or incomplete he must be called upon to prove the correctness or completeness of the same.
It also en joins that a reasonable opportunity of being heard should be given to the assessee to prove the correctness or complete ness of the return submitted by him.
Thus the requirement of the second part of the proviso to section 17(3) is reiterated in r. 15.
We understand that such a provision in the Act is peculiar to the Kerala Act and is not to be found in other sales tax statutes which provide for best judgment assess ment.
Thus on a true interpretation of section 17(3), the proviso thereto and r. 15, the inescapable conclusion would be that the assessee has been given stationary right to prove the correctness of his return by showing that the materials on the basis of which his return is found to be incorrect or incomplete are wrong and if for this purpose the assessee makes an expire prayer for cross examining the wholesale dealers whose accounts formed the sheet anchor of the notice issued to the assesee, he is undoubted ly entitled to cross examine such wholesale dealers.
In view of the language in which the Rules are couched it seems to us that a determinative issue arises in this case the Department taking the stand that the returns filed by the assessees are incorrect and incomplete, whereas the assessees contend that the 17 240SCI/77 248 returns are correct and that the accounts of the wholesale dealers which formed the basis of the information of the Sales tax Authorities were wrong and incorrect.
Such an issue can only be determined after examination of ' the accounts of both the parties and after affording the asses sees the right to cross examine the wholesale dealers con cerned, particularly when the assessee makes a specific prayer to this effect.
For these reasons, therefore, we are convinced that the judgment passed by the High Court in all these appeals is correct in law and the High Court has rightly decided the issues involved.
The appeals accordingly fail and are dismissed with no order as to costs.
P.B.R. Appeals dismissed.

dataset_name: IN-Abs

summary:
Section 17(3) of the Kerala General Sales Tax Act 1963 provides that if the return submitted by an assessee appears to be incorrect or incomplete.
the assessing authority may assess the dealer to the best of its judgment.
The proviso to the sub section enacts that before taking action under the sub section, the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness to completeness of such return.
Relying on the evidence furnished by entries in the books of account of some other dealers, the Sales Tax Officer disbelieved the assessee 's accounts and came to the conclusion that the return field by him was incorrect and incomplete and made a best judgment assessment under section 17(3).
The assessee 's request to cross examine the deal ers in regard to the correctness of their accounts was rejected by the Sales Tax Officer.
In revision the High Court quashed the order of the Sales Tax Officer.
Dismissing the State 's appeal, (Per Bhagwati and Sarkaria.
JJ) HELD .
The assessee was entitled to cross examine the dealers under the second part of the proviso to section 17(3).
The Sales Tax Officer 's refusal to summon the dealers for cross examination by the.
assessee constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the order of assessment made against him.
[239 F] (1) The rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is not an inflexible rule having a fixed connotation.
It has a variable content depending on the nature of the in quiry, the framework of the law under which it is held, the constitution of the authority holding the inquiry, the nature and character of the right affected and the coil sequences flowing from the decision.
The rule of audi alterem partem does not require in every case a specified procedure to be followed.
In a given case, the rule of audi alterem partem may import a requirement that witnesses, whose statements are sought to be relied upon by the author ity holding the inquiry, should be permitted to be cross examined by the party affected while in some other cases it may not.
The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case.
[237 B D] (2) (a) It is only on the existence of one of two condi tions, namely, that no return is .submitted by the assessee or the return submitted appears to be incorrect or incom plete that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment.
[237 H] 234 (b) The second part of the proviso lays down that where a return has been submitted, the assessee should be given a reasonable opportunity to prove the correctness or complete ness of such return.
"To prove" means to establish the correctness or completeness of the return by any mode per missible under law.
The opportunity to prove would, there fore, necessarily carry with it the right to examine wit nesses and that would include equally the right to cross examine witnesses examined by the Sales Tax Officer.
[238 G H] In the instant case, the assessee could prove the cor rectness and completness of his return only by showing that the entries in the books of account of the dealers on which the Sales Tax Officer relied, were false, bogus or manipu lated and that his return should not be disbelieved on the basis of such entries.
This could not be done unless an opportunity to cross examine the dealers was given.
[239 B] Murlimohan Prabhudayal vs State of Orissa, 26 S.T.C. 22 and M. Appukutty vs State of Kerala, 14 S.T.C. 489 approved.
Fazal Ali, J. (concurring).
Section 17(3) with the proviso thereto and r. 15, have given a statutory right to the assessee to prove the cor rectness of his return and the assessee was entitled to cross examine the wholesale dealers, relying on whose ac counts the Sales Tax Officer made a best judgment assess ment.
[247 E] (1) The well settled rules in regard to best judgment assessment are (i) The taxing authority must not act dis honestly or vindictively or capriciously.
He must make what he honestly believes to be a fair estimate, of the proper figures of assessment and for this purpose, he must be able to take into consideration all matters which he thinks will assist him in arriving at a fair and proper estimate.
Though it must necessarily be guess work it must be honest guess work.
[241 E] (ii) Although tax proceedings are quasi judicial and the Sales Tax Officer is not bound strictly by rules of evi dence, yet he must base his order on materials known to the assessee and after he has been given a chance to rebut the same.
[244 E] (iii) Admissibility of a document or material in evi dence is quite different from the value which the authority would attach to such material.
The tax authority can even base its conclusion on private opinion or assessment provid ed the same is fully disclosed to the assessee and he is given an opportunity to rebut the same.
[242 E] Income tax Commissioner vs Badridas Ramrai Shop, Akola (1937) 64 I.A. 102, 114, 115 and Dhakeswari Cotton Mills Ltd. vs Commissioner of Incometax, West Bengal, ; followed.
Raghubar Mandal Harihar Mandal vs State of Bihar 8 S.T.C. 770 and C. Vasantilal & Co. vs C.I.T. Bombay City 45/.T.R. 206 referred to.
Seth Gurmukh Singh vs Commissioner of Income tax Punjab, approved, 2(a) The words "opportunity of being heard" in section 17(3) are of very wide amplitude.
All that the court has.
to see is whether the assessee had been given a fair hearing.
Whether the hearing would extend to the right of demanding cross examination of witnesses or not, would depend upon the nature of the materials relied upon by the tax authorities, the manner in which the assessee can rebut those materials and the facts and circumstances of each case.
[234F G] 235 The second part of the proviso confers benefit on the asses see for giving him an opportunity not only of being heard but also of proving the correctness or completeness of his return.
Secondly, r. 15 clearly shows that where the return of the assessee is incorrect or incomplete he must be called upon to prove.
the correctness or completeness of the same.
It also enjoins on the Sales Tax Officer that a reasonable opportunity of being heard should be given to the assessee to prove the correctness and completeness of the return.
The requirement of the second part of the proviso to section 17(3) is reiterated in r. 15.
D] In the instant case, if the assessee desired the dealers whose accounts were used against him to be cross examined to prove that his return was not incorrect or incomplete, he could not be denied this opportunity.
The dealers might have made the entries to embarrass the assessee or they might have animus or business rivalry with the assessee.
The assessee could establish the correctness of his return only if he was allowed to cross examine the dealers.
[244 H] Jayantilal Thakordas vs State of Gujarat 23 S.T.C. 11 dis tinguished.
M. Appukutty vs State of Kerala, 14 S.T.C. 489 and Muralimohan Prabhudayal vs State of Orissa, 26 S.T.C. 22 approved.