Madhya Pradesh HC quashes CST Assessment since No Opportunity of Cross-Examination was allowed to Dealer [Read Judgment]

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The Madhya Pradesh High Court held that reasonable opportunity of being heard is a prerequisite for best judgment assessment and quashed assessments made under the Central Sales Tax Act by finding that the dealers were denied the right to cross-examine the third parties during the assessment proceedings.

The petitioner firm, M/s Munesh Enterprises which is a registered dealer under the M.P. General Sales Tax Act, M.P. The Commercial Tax Act and Central Sales Tax Act allegedly came to a standstill and was closed from the year of 1999 due to heavy losses. It is further alleged by the petitioner that the Commercial Tax Officer vide orders had completed the assessment under the M.P. Commercial Tax,  Central Sales Tax, and Entry Tax Act for the said periods on the basis of books of accounts after due verification and inquiry.

The respondent allegedly, reopened the original assessments of the said periods, under the directions of the Deputy Divisional Commissioner of Commercial Tax, on the basis of some information received from Krishi Upaj Mandi Samiti, Guna (M.P.) as regards purchase made by the petitioner. It is alleged that no opportunity during the reopening and reassessment proceedings was offered to the petitioner and the same was conducted ex part by passing appropriate orders.

The question debated before the High Court was whether this opportunity of being heard granted under Section 17 of the included an opportunity to cross-examine 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 returns submitted by the assessee were incorrect and incomplete.

The division bench comprising Justice Sheel Nagu and Justice Rajeev Kumar Srivastava held that grant of an opportunity to cross-examine is a concomitant of the expression “Reasonable Opportunity”. In the instant case, the matter was remanded by the State only for the purpose that opportunity of cross-examination which was not afforded to the petitioner in respect of the documents of the Krishi Upaj Mandi Samiti, Guna (M.P.) should now be afforded.

“Since the Appellate Authority has passed the impugned order by assigning reasons which cannot stand the test of reasonableness as authority fails to even address the issue in its right perspective, this Court is of the considered view that the power of judicial review deserves to be exercised u/Art.226 of Constitution in favor of the petitioner,” the court said.

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