R. Sudhakar, J.@mdashAggrieved by the order passed by the Tamil Nadu Sales Tax Appellate Tribunal in dismissing the appeal filed by it, the appellant/Revenue is before this Court by filing the present revision.
2. This Court, vide order dated 17.4.09, while admitting the revision, framed the following substantial question of law for consideration :-
"Whether the Tribunal being a final fact finding authority, is correct in simply extracting the finding arrived at by the lower authorities and confirmed it without independent application of its mind and without reasonableness?"
3. The substantial question of law, as framed above, is a well established legal principle that the Tribunal is a fact finding authority and is required to go into the facts of the case and give its reasonings in accordance with law. It cannot extract the order of the lower authority and confirm the same. Any order passed by the Tribunal and/or any authority should pass the test of reasonableness, which is sine qua non to any judicial or administrative orders. The Supreme Court, in a catena of decisions has stressed time and again that it is incumbent on the administrative and quasi judicial authorities to pass orders recording reasons, which, on appeal before the appellate forum, would enable the higher judicial forum, viz., the High Courts and the Supreme Court, to effectively exercise their appellate supervisory powers. In the case of
35. The decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the standpoint of policy and expediency.
36. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision, are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi- judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge.
37. Having considered the rationale for the requirement to record the reasons for the decision of an administrative authority exercising quasi-judicial functions we may now examine the legal basis for imposing this obligation. While considering this aspect the Donoughmore Committee observed that it may well be argued that there is a third principle of natural justice, namely, that a party is entitled to know the reason for the decision, be it judicial or quasi-judicial. The Committee expressed the opinion that there are some cases where the refusal to give grounds for a decision may be plainly unfair; and this may be so, even when the decision is final and no further proceedings are open to the disappointed party by way of appeal or otherwise? and that where further proceedings are open to a disappointed party, it is contrary to natural justice that the silence of the Minister or the Ministerial Tribunal should deprive them of the opportunity?. (p. 80) Prof. H.W.R. Wade has also expressed the view that natural justice may provide the best rubric for it, since the giving of reasons is required by the ordinary man(tm)s sense of justice?. (See Wade, Administrative Law, 6th edn. p. 548.) In Siemens Engineering Co. case this Court has taken the same view when it observed that the rule requiring reasons to be given in support of an order is, like the principles of audi alteram partem, a basic principle of natural justice which must inform every quasi- judicial process?. This decision proceeds on the basis that the two well known principles of natural justice, namely (i) that no man should be a judge in his own cause, and (ii) that no person should be judged without a hearing, are not exhaustive and that in addition to these two principles there may be rules which seek to ensure fairness in the process of decision- making and can be regarded as part of the principles of natural justice. This view is in consonance with the law laid down by this Court in A.K. Kraipak v. Union of India wherein it has been held : (SCR pp. 468-69 : SCC p. 272, para 20)
"The concept of natural justice has undergone a great deal of change in recent years. In the past it was thought that it included just two rules namely : (i) no one shall be a judge in his own cause (nemo debet esse judex propria causa), and (ii) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem). Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must he held in good faith, without bias and not arbitrarily or 6 unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice."
38. A similar trend is discernible in the decisions of English courts wherein it has been held that natural justice demands that the decision should be based on some evidence of probative value. (See : R. v. Deputy Industrial Injuries Commissioner ex p. Moore; Mahon v. Air New Zealand Ltd.)
39. The object underlying the rules of natural justice is to prevent miscarriage of justice? and secure of air play in action?. As pointed out earlier the requirement about recording of reasons for its decision by an administrative authority exercising quasi-judicial functions achieves this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decision-making. Keeping in view the expanding horizon of the principles of natural justice, we are of the opinion, that the requirement to record reason can be regarded as one of the principles of natural justice which govern exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on the administrative authority. With regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi-judicial functions the legislature, while conferring the said power, may feel that it would not be in the larger public interest that the reasons for the order passed by the administrative authority be recorded in the order and be communicated to the aggrieved party and it may dispense with such a requirement. It may do so by making an express provision to that effect as those contained in the Administrative Procedure Act, 1946 of U.S.A. and the Administrative Decisions (Judicial Review) Act, 1977 of Australia whereby the orders passed by certain specified authorities are excluded from the ambit of the enactment. Such an exclusion can also arise by necessary implication from the nature of the subject matter, the scheme and the provisions of the enactment. The public interest underlying such a provision would outweigh the salutary purpose served by the requirement to record the reasons. The said requirement cannot, therefore, be insisted upon in such a case.
40. For the reasons aforesaid, it must be concluded that except in cases where the requirement has been dispensed with expressly or by necessary implication, an administrative authority exercising judicial or quasi-judicial functions is required to record the reasons for its decision."
(See :
In view of the well established legal principle, as enunciated by the Courts time and again, the above question of law framed being on the same pedestal, the same cannot be said to be a question of law, much less substantial question of law and, therefore, requires no consideration.
4. In such view of the matter, this Court, with the consent of counsel for either side, while taking up the matter for hearing, reframed the question of law. Accordingly, the substantial question of law is reframed as hereinbelow and the learned counsel on either side were asked to address the Court on the below substantial question of law :-
"Whether the department is entitled to levy additional sales tax @ 2% holding that the entire turnover for the whole year has exceeded Rs.1 Crore or it should be levied pro-rata on the basis of turnover as on 31.7.96 @ 1.5% when the taxable turnover is below Rs.1 Crore?"
5. The facts, in a nutshell, are as hereunder :-
The assessee/respondent herein is a manufacturer of monoblock pumps and motors. In respect of assessment year 1996-1997, additional sales tax on turnover of Rs.10,27,098/= was levied at the rate of 2% against which the assessee/respondent herein preferred appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held in favour of the assessee against which the Department preferred appeal to the Tribunal. The Tribunal, on a consideration of the entire materials placed before it, set aside the levy of additional sales tax against which the Department has preferred the present appeal.
6. Heard the learned standing counsel appearing for the Department/appellant and the learned counsel appearing for the assessee/respondent on the reframed question of law and perused the materials found in the typed set of documents.
7. The levy of additional sales tax and exemption from taxable turnover was increased from Rs.1 Crore to Rs.100 Crores on and from 1.8.96. Prior to the said date, viz., upto 31.7.96, levy of additional sales tax stood as hereunder :-
Section 2(1)(a) as it originally stood reads as under:-
"Levy of additional tax in the case of certain dealers:-
[(1) (a) The tax payable under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) (hereinafter in this section referred to as the said Act), shall, in the case of a dealer whose taxable turnover for a year exceeds [ten lakhs of rupees], be increased by an additional tax calculated at the following rates, namely:-
Provided that where in respect of declared goods as defined in clause (h) of section 2 of the said Act, the tax payable by such dealer under the said Act, together with the additional tax payable under this sub-section, exceeds four per cent of the sale or purchase price thereof, the rate of additional tax in respect of such goods shall be reduced to such an extent that the tax and the additional tax together shall not exceed four per cent of the sale or purchase price of such goods."
8. On and from 1.8.96, amendments were made with regard to levy of additional sales tax. The amended sections 2(1)(a) and 2(1)(aa) of the Tamil Nadu General Sales Tax are as hereunder :-
Amendment of Section 2:- In section 2 of the Tamil Nadu Additional Sales Tax Act, 1970 (hereinafter referred to as the principal Act), in sub-section (1)-
(i) in clause (a), for the word "dealer" the words "casual trader or agent of a non-resident dealer or a local branch of a firm or company situate outside the State" shall be substituted;
(ii) after clause (a) and before the proviso thereto, the following shall be inserted, namely:-
"(aa) The tax payable under the said Act, shall in the case of a dealer including the principal selling or buying goods in this State though agents other than the casual trader or agent of a non-resident dealer or a local branch of a firm or company situated outside the State whose taxable turnover for a year exceeds one hundred crores of rupees, be increased by an additional tax calculated at the following rates, namely:-
Explanation.- ''Taxable turnover'' for the purpose of this clause in respect of a principal selling or buying goods in this State through agents shall be the aggregate taxable turnover of all his agents relating to the sale or purchase of the goods of such principal within the State."
9. In the present case, as could be seen, as on 31.7.96, the taxable turnover is Rs.12,81,980/=. On the same amount, according to the then existing Section 2(1)(a), rate of tax will be at 1.5% of the taxable turnover after giving deduction of Rs.10 Lakhs. In similar circumstances, the Department''s view that 2% additional sales tax should be imposed on the taxable turnover consequent to the assessee exceeding Rs.1 Crore of taxable turnover was not accepted by this Court in the case of
"16. To make the position more clear, for instance, in the financial year 1.4.1996 to 31.3.1997, for the period upto 31.7.1996, if the taxable turnover was Rs.50 lakhs, for the first ten lakhs of rupees, there would be no additional tax liability, for the rest forty lakhs of rupees, the liability by way of additional tax should be calculated at the rate of 1.5% and if for the whole of the financial year, the taxable turn over exceeded Rs.100 crores, for the remaining amount of Rs.99.50 lakhs i.e., excluding Rs.50 lakhs, which is relatable to the period only upto 31.7.1996, the rate of tax as per the amended Section 2(1)(aa) will have to be worked out.
17. Keeping the above statutory implication relating to payment of additional sales tax as was applicable upto 31.7.1996 and after 1.8.1996, when we examine the order of the Assessing Authority dated 28.1.1998, in the case on hand, we find that the taxable turnover of the respondent - assessee was Rs.54,97,880/- up to 31.7.1996. The taxable turnover for the financial year is stated to have exceeded rupees one crore. But for the purpose of calculation of additional sales tax, since for the whole of the financial year, the taxable turnover did not exceed one hundred crores, there would be no necessity to make any further calculation for the period beyond 31.7.1996. The Assessing Authority calculated the additional sales tax at the rate of 2% on the taxable turn over for the whole of the year.
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19. Having regard to the said position, the impugned order of the Tribunal as well as that of the Assessing Authority are liable to be set aside. While setting aside the order the Assessing Authority, we direct the Assessing Authority to pass fresh orders by keeping the taxable turnover of the respondent assessee upto 31.7.1996 in a sum of Rs.54,97,880/- and calculate the tax at the rate of 1.5% on the sum of Rs.44,97,880/- (i.e.), after deducting the first ten lakhs as provided under the proviso to sub-clause (i) of Section 2(1)(a)."
10. On a detailed analysis of the order passed by the Appellate Assistant Commissioner as also the Tribunal, it is evident that as on 31.7.96, the taxable turnover of the assessee/respondent did not exceed Rs.1 Crore and the assessee/respondent, by virtue of this unamended Section as also the decision of this Court in National Time''s case (supra), is entitled to claim payment of additional sales tax at the rate of 1.5%, after deducting Rs.10 Lakhs of the total taxable turnover. Accordingly, the substantial question of law is answered in favour of the assessee/respondent and against the appellant/Revenue.
11. In the result, the appeal fails and the same is dismissed confirming the order passed by the Tamil Nadu Sales Tax Appellate Tribunal. However, in the circumstances of the case, there shall be no order as to costs.
