# Agmotex Fabrics Pvt. Ltd v. State of U.P. & Ors

- **Citation:** (2024) 11 ILRA 106
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-11-18
- **Case number:** Writ Tax No. 1757 of 2024
- **Bench:** Shekhar B. Saraf, Vipin Chandra Dixit
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/agmotex-fabrics-pvt-ltd-v-state-of-u-p-ors-51175
- **Pages:** 13

## Headnote

Tax Law - Goods and Services Tax Act,
2017 - Section 74 - Financial Year 2021-
22 - Audi alteram partem - Petitioner's
business premises were searched, found
that petitioner wrongly availed ITC and
refund of same on purchase of glycerin,
fatty acid and finishing chemical made up
of perfumery compound, not produced
proper evidence with regard to cancelling
of 115 e-way bills - Show cause notice
issued,
asking
it
to
refund
excess
utilization of ITC along with penalty
amounting to Rs. 2,24,24,710/- Petitioner
denied allegations, mentioning that show
cause notice not supported with any
evidence - By another show cause notice
amount of tax and penalty revised - In
spite of reply having been uploaded by
petitioner on portal, respondent asked to
appear for personal hearing - Petitioner
informed that it has already given detailed
reply - By impugned order, respondent
demanded tax along with penalty and
interest amounting to Rs. 37,31,642/-.
(Para 3)

Contention that impugned order was
copy-paste of reply given by petitioner to
show
cause
notice
and
explanation
provided not considered in reasonable
manner - Raw materials glycerine, fatty
acid and perfumery compound used for
manufacture of fabrics, not dealt in order.
(Para 4)

Held, entire show cause notice and order
are speculative in nature, based on survey
report, by which authorities concluded
that said items are not used without
carrying out any test for manufacture of
fabrics. (Para 5)

Explanation given by petitioner in affidavit
annexing certificates of three experts not
considered by respondents, no reasons
provided
for
rejection
-
Once
such
explanation
has
provided,
it
was
incumbent upon respondents to have
tested fabrics to come to conclusion that
three raw materials were not used in
manufacture of fabrics, without granting
opportunity of hearing, fastening of such
liability was arbitrary and illegal - Thus,
impugned order quashed, set aside. (Para
6, 20)

Writ Petition allowed. (E-13)

List of Cases cited:

## Text

_Characters 0–39,863 of 44,920. This is a partial read: ask again with offset=39863 for what follows._

106 INDIAN LAW REPORTS ALLAHABAD SERIES
vehicle were fully reconciled with the EWay bill. Non filling of the part of E-Way
Bill would not ipso facto trigger the
proceedings under Section 129 of the GST
Act in the facts of this case.

5. The adjudicating authority as well
as the appellate authority negatived the
submissions made on behalf of the
assessee and passed the impugned order.

6. The facts which are admitted and
disclosed from the records are these.
There was no discrepancy in the goods
which were physically found at the time
of inspection and details of goods
recorded in the E-Way Bill available with
the driver of the vehicle. The authorities
below have not found any intent to evade
tax.

7. This Court has set its face against
initiation of proceedings under Section
129 of GST Act in the wake of mere
technical breaches. When substantial
compliance of the provisions is disclosed
and when the physical inspection of
goods tallies with the goods declared in
the E-Way Bill and no intent of tax
evasion is made out, proceedings under
Section 129 of GST Act become vitiated.

8. In VSL Alloys (India) Pvt. Ltd.
Vs State of U.P. and Another (Writ
Tax No.- 637 of 2018) this Court has
held as under:

"We are in full agreement with
the submission of learned counsel for the
petitioner and after perusal of the relevant
documents, we find no ill intention at the
hands of the petitioner nor the petitioner
was supposed to fill up Part-B giving all
the details including the vehicle number
before the goods are loaded in a vehicle,
which is meant for transportation to the
same to its end destination.

In the present case, all the
documents were accompanied the goods,
details are duly mentioned which reflects
from the perusal of the documents.
Merely of none mentioning of the vehicle
no. in Part-B cannot be a ground for
seizure of the goods. We hold that the
order of seizure is totally illegal and once
the petitioner has placed the material and
evidence with regard to its claim, it was
obligatory on the part of the respondent
no.2 to consider and pass an appropriate
reasoned order. In this case, no reasons
are assigned nor any discussion is
mentioned in the impugned order of
seizure and notice of penalty. The
respondent no.2 has also not considered
the above notification dated 07.03.2018."

9. The matter is covered by the
judgment
rendered
in
VSL
Alloys
(supra). The impugned order dated
22.12.2023 passed by the respondent no.
2, Additional Commissioner, Commercial
Tax Grade-2 (Appeal)-I, State Tax, Noida
is unsustainable and is quashed.

10. The petition is allowed.
----------
(2024) 11 ILRA 106
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 18.11.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.
THE HON'BLE VIPIN CHANDRA DIXIT, J.

Writ Tax No. 1757 of 2024

Agmotex Fabrics Pvt. Ltd. ...Petitioner
Versus
State of U.P. & Ors. ...Respondents
11 All. Agmotex Fabrics Pvt. Ltd. Vs. State of U.P. & Ors.
107
Counsel for the Petitioner:
Mr. Rahul Agarwal, Advocate

Counsel for the Respondents:
Mr. Ankur Agarwal, Standing Counsel

Tax Law - Goods and Services Tax Act,
2017 - Section 74 - Financial Year 2021-
22 - Audi alteram partem - Petitioner's
business premises were searched, found
that petitioner wrongly availed ITC and
refund of same on purchase of glycerin,
fatty acid and finishing chemical made up
of perfumery compound, not produced
proper evidence with regard to cancelling
of 115 e-way bills - Show cause notice
issued,
asking
it
to
refund
excess
utilization of ITC along with penalty
amounting to Rs. 2,24,24,710/- Petitioner
denied allegations, mentioning that show
cause notice not supported with any
evidence - By another show cause notice
amount of tax and penalty revised - In
spite of reply having been uploaded by
petitioner on portal, respondent asked to
appear for personal hearing - Petitioner
informed that it has already given detailed
reply - By impugned order, respondent
demanded tax along with penalty and
interest amounting to Rs. 37,31,642/-.
(Para 3)

Contention that impugned order was
copy-paste of reply given by petitioner to
show
cause
notice
and
explanation
provided not considered in reasonable
manner - Raw materials glycerine, fatty
acid and perfumery compound used for
manufacture of fabrics, not dealt in order.
(Para 4)

Held, entire show cause notice and order
are speculative in nature, based on survey
report, by which authorities concluded
that said items are not used without
carrying out any test for manufacture of
fabrics. (Para 5)

Explanation given by petitioner in affidavit
annexing certificates of three experts not
considered by respondents, no reasons
provided
for
rejection
-
Once
such
explanation
has
provided,
it
was
incumbent upon respondents to have
tested fabrics to come to conclusion that
three raw materials were not used in
manufacture of fabrics, without granting
opportunity of hearing, fastening of such
liability was arbitrary and illegal - Thus,
impugned order quashed, set aside. (Para
6, 20)

Writ Petition allowed. (E-13)

List of Cases cited:

1. St. of Kerala Vs K.T. Shaduli Grocery Dealer
Etc. reported in (1977) 2 SCC 777, (Para 2, 3,
12)

2. Mrs. Maneka Gandhi Vs U.O.I.& anr. reported
in (1978) 1 SCC 248, (Para 14)

3. Maharashtra St.Board of Secondary and
Higher Secondary Education Vs K.S. Gandhi &
ors.reported in (1991) 2 SCC 716, (Para 22)

4. A.S. Motors Private Limited Vs U.O.I. & ors.
reported in (2013) 10 SCC 114, (Para 8)

5. Madhyamam Broadcasting Limited Vs U.O.I.
& ors. reported in 2023 SCC OnLine 366, (Para
47)

6. St.Bank of India & ors. Vs Rajesh Agarwal &
ors. reported in (2023) 6 SCC 1, (Para 36)

7. Singrauli Super Thermal Power Station Vs
Ashwani Kumar Dubey & ors.(Civil Appeal
No.3856/2022 decided on July 5, 2023), (Para
15 to 17)

8. S.R. Cold Storage Vs U.O.I. & ors. reported in
2022 SCC online (All) 550; [2022] 448 ITR 37
(All), (Para 25 to 28)

9. M/s Eastern Machine Bricks and Tiles
Industries Vs St. of U.P. & ors., Neutral Citation
No.- 2024:AHC:3222, (Para 10, 11)
(Delivered by Hon'ble Shekhar B. Saraf, J.)

1. Heard learned counsel for the
parties and perused the record.
108 INDIAN LAW REPORTS ALLAHABAD SERIES

2. This writ petition has been filed
under Article 226 of the Constitution of
India, wherein the writ petitioner is
aggrieved by the impugned order dated
September 12, 2024 passed by the Deputy
Commissioner, State Goods & Services
Tax, Sector 17, Kanpur/respondent No.3
under Section 74 of the Goods and Services
Tax Act, 2017 (hereinafter referred as 'the
Act') for the financial year 2021-22.

3. Factual matrix giving rise to the
instant writ petition is delineated below:

a. On December 27, 2022,
petitioner's
Business
premises
were
subjected to a search where it was found
that the petitioner had wrongly availed the
Input Tax Credit ( hereinafter referred to as
"ITC") and refund of the same on purchase
of glycerin, fatty acid and finishing
chemical made up of perfumery compound.
It was further found that the petitioner had
also not produced proper evidence with
regard to cancelling 115 e-way bills by it
during
the
financial
year
2021-22.
Subsequently, a show cause notice dated
March 20, 2024 was issued to the petitioner
by the Deputy Commissioner, State Goods
and
Services
Tax
Sector-17,
Kanpur/respondent No.3 asking it to refund
the excess utilization of ITC along with
penalty amounting to Rs. 2,24,24,710/- by
April 19, 2024.

b. In response to the aforesaid
show cause notice, the petitioner filed its
reply on April 18, 2024 wherein it denied
the allegations made against it mentioning
that the show cause notice was not
supported with any evidence or material.

c. On June 4, 2024, another show
cause notice under Section 74 of the Act
was issued to the petitioner by which the
amount of Tax and penalty was revised to
Rs. 2,43,74,686/-.

d. In response to the notice dated
June 4, 2024, the petitioner again filed its
reply supported with an affidavit wherein it
again denied the allegation that the
glycerin,
fatty
acid
and
perfumery
compound are not used in its business and
submitted that these materials are used as
'raw
material'
by
the
company
in
manufacturing process and the ITC with
respect to these materials has been legally
availed by the petitioner. Explanation in
respect of 115 e-way bills that were
cancelled during the financial year 2021-22
was also furnished by the petitioner in his
affidavit.

e. In spite of the reply dated July
2, 2024 having been uploaded by the
petitioner on the portal, the respondent no.
3 gave a reminder dated August 8, 2024 to
the petitioner and asked it to appear for
personal hearing and submit its reply by
September 6, 2024.

f. The petitioner vide its letter
dated August 10, 2024, informed the
respondent no. 3 that it has already given a
detailed reply dated July 2, 2024 in
response to the show cause notice.

g.
Notwithstanding
reply
submitted by the petitioner, the respondent
No. 3 passed the order dated September 12,
2024 under Section 74 of the Act imposing
a demand of Tax along with penalty and
interest amounting to Rs. 37,31,642/- upon
the petitioner. Relevant portion of the said
order reads as under:

"उक्त दाखिल स्पष्टीकरण का अनुशीलन करने पर
पाया गया खक दाखिल स्पष्टीकरण के खिन्दु सं0-09, 11, 23
में यह उल्लेि खकया गया है खक आरोखपत खिन्दुओं के सम्िन्ध
में प्रश्नगत कारण िताओ नोखिस के साथ तथा कखथत तथ्यों का
अपेखित खििरण नही खदया गया है और न ही जांच ररपोिट दी
गयी है। यह भी उल्लेि खकया गया है खक ई-िे खिल को
अखभिखडित करने का कोई साक्ष्य न तो नोखिस में संदखभटत है
और न ही प्रदत्त खकया गया है तथा न्यायखहत में सम्पूणट जांच
11 All. Agmotex Fabrics Pvt. Ltd. Vs. State of U.P. & Ors.
109
के अखभलेिों के खनरीिण एिं परीिण करने हेतु समय खदये जाने
का उल्लेि खकया गया है।

अतः उपरोक्त के सम्िन्ध में ररफ्रेन्स सं0ZD09824054924X
खदनांक-07-08-2024
द्वारा
करदाता को अखभलेिों के खनरीिण एिं परीिण करने हेतु
खदनांक 06-09-2024 के खलए नोखिस जारी करते हुए यह
अपेिा की गयी खक करदाता उपखस्थत होकर प्रश्नगत खिन्दुओं
का अिलोकन कर लें तथा तथ्यपरक स्पष्टीकरण दाखिल करें।
उक्त के सम्िन्ध में पत्रािली के अिलोकन हेतु कोई उपखस्थत
नहीं हुआ और न ही कोई तथ्य परक स्पष्टीकरण दाखिल खकया
गया। ज्ञातव्य है खक केिल 02 खिन्दओं पर करदेयता खनधाटररत
खकये जाने का नोखिस में उल्लेि खकया गया है। पूिट में दाखिल
स्पष्टीकरण में 28 खिन्दुओं का जिाि दाखिल खकया गया है
खजसमें खिन्दु सं0-09,11 ि 23 को छोड़कर शेष खिन्दुओं
करदाता का अपना मत प्रकि खकया गया है जो नोखिस के
खिन्दुओं से अलग से खिन्दु सं0-09,11 ि 23 में नोखिस का
जिाि देने के स्थान पर कखतपय तथ्यो की प्रमाखणकता ि जांच
ररपोिट प्राप्त न कराये जाने का उल्लेि खकया गया है। खजसके
खलए करदाता को उपखस्थत होकर पत्रािली का परीिण करने
हेतु उक्त नोखिस जारी की गयी थी। परन्तु करदाता उपखस्थत नही
हुए। अतः दाखिल स्पष्टीकरण सन्तोषजनक न पाये जाने के
कारण अस्िीकार करते हुए खनम्न प्रकार करदेयता, ब्याज ि
अथटदडि आरोखपत खकया जाता है:-

1- यह खक करदाता द्वारा खललसरीन, फैिी एखसि
एिं परफ्यूमरी कंपाउंि से िने खफखनखशंग कैखमकल /
एस०एम०पी० खलखविि (एच०एस०एन०-3809) की िरीद
प्रदखशटत की गयी है। जिखक इन िस्तुओं का कम्पनी के द्वारा
खनमाटण प्रखिया में कोई उपयोग नहीं है। िरीदों में सखन्नखहत
आई०िी०सी० का उपयोग करते हुए अपनी करदेयता को
सेिआफ खकया गया है अथिा इन प्रदखशटत िरीदों में
अन्तरतखलत आई०िी०सी० का ररफडि प्राप्त खकया गया है। अतः
करदाता द्वारा गलत ढंग से उपभोग खकये गये आई०िी०सी०
तथा उसके गलत तरीके से प्राप्त खकये गये ररफडि को उसकी
करदेयता, ब्याज ि अथटदडि सखहत खनधाटररत खकया जाना
अपेखित है।"
(Below is the English translation of the
above Hindi portion)

On perusal of the said filed
explanation, it is found that in the point
Nos.9, 11 & 23 of the filed explanation, it
has been mentioned that the desired details
of the so called facts have not been given
with respect to the Show Cause Notice
regarding the charges, nor has been the
inquiry report provided. It has also been
mentioned that neither there is any
reference of any evidence in the notice
regarding the quashing of the e-way bill
nor has it been provided and it is
mentioned to provide time, in the interest of
justice, for inspection and examination of
records of the entire inquiry.

Therefore, in relation to the
above, by issuing notice to the taxpayer for
inspection and examination of the records
on
06-09-2024
by
reference
No.ZD090824054924X dated 07-08-2024,
it was expected that the taxpayer should
appear and observe the point in question
and submit explanation based on facts.

In relation to the above, no one
appeared for inspection of the file nor any
factual explanation was submitted. It is to
be noted that notice mentions that the tax
liability has been determined only on 02
points. In the explanation filed earlier,
reply has been filed on 28 points in which
except for point Nos. 09, 11 & 23, the
taxpayer has expressed his side on the
remaining points; for the separate points-
point nos. 09, 11 & 23, instead of replying
to the notice, it has been mentioned that the
authenticity of certain facts and inquiry
report have not been received regarding
which the said notice was issued to the
taxpayer to appear and examine the file.
But the taxpayer did not appear, therefore,
the explanation submitted, not being found
satisfactory, is rejected and hence, the tax
liability, interest and penalty are imposed
as follows:-

1- that taxpayer has shown the
purchase of Glycerine, fatty acid and
finishing chemical/SMP Liquid (HSN-3809)
made from perfumery compound, whereas,
the company has no role in manufacturing
process of these goods. By availing the ITC
embodied in the purchases, tax liability has
110 INDIAN LAW REPORTS ALLAHABAD SERIES
been set off or refund has been obtained for
the ITC involved in the shown purchases.
Therefore, for the the ITC wrongly availed
by the taxpayer and refund obtained so
wrongfully, it is expected to determine his
tax liability with the interest and penalty.

h.
Being
aggrieved
by
the
impugned order dated September 12, 2024,
the petitioner has filed the instant writ
petition.

4. Sri Rahul Agarwal, learned counsel
for the petitioner submits that the impugned
order is only a copy-paste of the reply
given by the petitioner to the show cause
notice and the explanation provided therein
has not been considered in a reasonable
manner. The argument of the petitioner is
that raw materials glycerine, fatty acid and
perfumery
compound
are
used
for
manufacture of fabrics which have not been
dealt with in the order.

5. In fact, it is very clear that the entire
show cause notice and the order are
speculative in nature and are based on one
survey report only using which the
authorities have come to a conclusion that
the said items are not being used without
carrying out any test for manufacture of
fabrics. Normally, this Court does not
interfere in the order passed under Section
74 of the Act when there is a provision of
statutory appeal under the Act. However, it
is to be seen that the petitioner was not
present on the date when the matter was to
be heard and no further opportunity of
hearing was given by the respondents to the
petitioner to explain its reply in detail.

6. The explanation given by the
petitioner
in
the
affidavit
annexing
certificates of three experts has not been
considered at all by the respondents and no
reasons have been provided as to why the
same are to be rejected. Once such an
explanation has been provided, it was
incumbent upon the respondents to have
tested the fabrics to come to a conclusion
that three raw materials were not used in
the manufacture of fabrics. Without having
done
so
and
without
granting
an
opportunity of fair hearing to the petitioner,
fastening of such liability upon the
petitioner is arbitrary and illegal and cannot
be countenanced by this Court.

7.
Counsel
on
behalf
of
the
respondents has supported the show cause
notice and the findings in the impugned
order by submitting that the petitioner was
not able to provide explanation on all
points, and therefore, the order under
Section 74 of the Act fastens liability on
the points that were not answered by the
petitioner. However, he had no explanation
as to why the fabrics were not examined to
check whether the petitioner had used the
raw materials in the manufacture of the
same.

8. Before dwelling into the present
factual matrix, this Court is of the view that
one needs to examine the scope of natural
justice as has been explained by a catena of
judgements of the Supreme Court and this
Court. The Supreme Court, in State of
Kerala v. K.T. Shaduli Grocery Dealer
Etc. reported in (1977) 2 SCC 777, while
examining the provisions of the Kerala
General Sales Tax Act, 1963, laid down the
contours of the principles of natural justice.
The relevant paragraphs of the said
judgement read as under:

"2. 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
11 All. Agmotex Fabrics Pvt. Ltd. Vs. State of U.P. & Ors.
111
reaching their conclusions. It is true, as
pointed out by this Court in Dhakeswari
Cotton Mills Ltd. v. CIT [AIR 1955 SC 154
: (1955) 1 SCR 941 : (1955) 27 ITR 126]
that a taxing officer "is not fettered 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 constant: they are not absolute
and
rigid
rules
having
universal
application. It was pointed out by this
Court
in
Suresh
Koshy
George
v.
University of Kerala [AIR 1969 SC 198 :
(1969) 1 SCR 317 : (1969) 1 SCJ 543] 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
v. Duke of Norfolk [(1949) 1 All ER 109] :

"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 I do not derive much
assistance from the definitions of natural
justice which have been from time to time
used, but, whatever standard is adopted,
one essential is that the person concerned
should have a reasonable opportunity of
presenting his case."

3. One of the rules which
constitutes a part of the principles of
natural justice is the rule of audi alteram
partem which requires that no man should
be condemned unheard. It is indeed a
requirement 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 v.
Union of India [(1969) 2 SCC 262 : (1970)
1 SCR 457] "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 Constitution is dispensed not only by
judicial or quasi-judicial authorities but
also
by
authorities
discharging
administrative 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 constitution of the authority
holding the inquiry, the nature and
character of the rights affected and the
consequences flowing from the decision. It is,
therefore, not possible to say that in every case
the rule of audi alteram partem requires that a
particular specified procedure is to be followed.
It may be that in a given case the rule of audi
alteram partem may import a requirement that
witnesses whose statements are sought to be
relied upon by the authority holding the inquiry
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 facts and
circumstances of each case."

9. The Court in the said judgment also
dealt with the issue of disclosing the
112 INDIAN LAW REPORTS ALLAHABAD SERIES
relevant documents that the respondent
authorities are relying upon in the show
cause notice to the assessee. The relevant
paragraph is delineated below:

"12. This Court further fully
approved of the four propositions laid
down by the Lahore High Court in Seth
Gurmukh Singh v. Commissioner of Income
Tax [(1944) 12 ITR 393 (Lahore HC)].
This Court was of the opinion that the
Taxing Authorities had violated certain
fundamental rules of natural justice in that
they did not disclose to the assessee 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
information, 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."

10. The Apex Court in Mrs. Maneka
Gandhi v. Union of India and another
reported in (1978) 1 SCC 248 laid down
the ratio in relation to the principles of audi
alteram partem in the doctrine of natural
justice.
The
relevant
paragraph
is
delineated below:

"14. .....But at the same time it
must be remembered that this is a rule of
vital
importance
in
the
field
of
administrative law and it must not be
jettisoned
save
in
very
exceptional
circumstances where compulsive necessity
so demands. It is a wholesome rule
designed to secure the rule of law and the
court should not be too ready to eschew it
in its application to a given case. True it is
that in questions of this kind a fanatical or
doctrinaire approach should be avoided,
but that does not mean that merely because
the traditional methodology of a formalised
hearing may have the effect of stultifying
the exercise of the statutory power, the audi
alteram partem should be wholly excluded.
The court must make every effort to salvage
11 All. Agmotex Fabrics Pvt. Ltd. Vs. State of U.P. & Ors.
113
this cardinal rule to the maximum extent
permissible in a given case. It must not be
forgotten
that
"natural
justice
is
pragmatically flexible and is amenable to
capsulation under the compulsive pressure
of
circumstances".
The audi
alteram
partem rule is not cast in a rigid mould and
judicial decisions establish that it may
suffer situational modifications. The core of
it must, however, remain, namely, that the
person affected must have a reasonable
opportunity of being heard and the hearing
must be a genuine hearing and not an
empty public relations exercise. That is why
Tucker, L.J., emphasised in Russel v. Duke
of Norfolk [(1949) 1 All ER 109] that
"whatever standard of natural justice is
adopted, one essential is that the person
concerned should have a reasonable
opportunity of presenting his case". What
opportunity may be regarded as reasonable
would necessarily depend on the practical
necessities of the situation. It may be a
sophisticated full-fledged hearing or it may
be a hearing which is very brief and
minimal : it may be a hearing prior to the
decision or it may even be a post-decisional
remedial
hearing.
The audi
alteram
partem rule is sufficiently flexible to permit
modifications and variations to suit the
exigencies of myriad kinds of situations
which may arise."

11.
The
Supreme
Court
in
Maharashtra State Board of Secondary
and Higher Secondary Education v. K.S.
Gandhi and Others reported in (1991) 2
SCC 716 held in paragraph 22 as under :

"22. ..... The omnipresence and
omniscience (sic) of the principle of natural
justice acts as deterrence to arrive at
arbitrary decision in flagrant infraction of
fair play. But the applicability of the
principles of natural justice is not a rule of
thumb or a strait-jacket formula as an
abstract proposition of law. It depends on
the facts of the case, nature of the inquiry
and the effect of the order/decision on the
rights of the persons and attendants
circumstances. ...."

12. The Supreme Court in A.S.
Motors Private Limited v. Union of India
and Others reported in (2013) 10 SCC
114 held as under :

"8. Rules of natural justice, it is
by now fairly well settled, are not rigid,
immutable or embodied rules that may be
capable of being put in straitjacket nor
have the same been so evolved as to apply
universally to all kind of domestic tribunals
and enquiries. What the Courts in essence
look for in every case where violation of
the principles of natural justice is alleged is
whether the affected party was given
reasonable opportunity to present its case
and whether the administrative authority
had
acted
fairly,
impartially
and
reasonably. The doctrine of audi alteram
partem is thus aimed at striking at
arbitrariness and want of fair play. Judicial
pronouncements on the subject have,
therefore, recognised that the demands of
natural justice may be different in different
situations depending upon not only the
facts and circumstances of each case but
also on the powers and composition of the
Tribunal and the rules and regulations
under
which
it
functions.
A
Court
examining a complaint based on violation
of rules of natural justice is entitled to see
whether the aggrieved party had indeed
suffered any prejudice on account of such
violation. To that extent there has been a
shift from the earlier thought that even a
technical infringement of the rules is
sufficient to vitiate the action. Judicial
pronouncements on the subject are a
114 INDIAN LAW REPORTS ALLAHABAD SERIES
legion. We may refer to only some of the
decisions on the subject which should in
our opinion suffice."

13. In a recent judgement of the
Supreme
Court
in
Madhyamam
Broadcasting Limited v. Union of India
and others reported in 2023 SCC OnLine
366, the Court reiterated the principles of
natural justice that guarantee a reasonable
procedure to be followed as per Article 14,
19 and 21 of the Constitution of India. The
relevant paragraph of the said is delineated
below:

"47. The judgment of this Court
in Maneka Gandhi (supra) spearheaded
two doctrinal shifts on procedural fairness
because of the constitutionalising of
natural justice. Firstly, procedural fairness
was no longer viewed merely as a means to
secure a just outcome but a requirement
that holds an inherent value in itself. In
view of this shift, the Courts are now
precluded from solely assessing procedural
infringements
based
on
whether
the
procedure would have prejudiced the
outcome of the case [See ; also see
Swadeshi Cotton Mills v. Union of India;
A.I.R. 1981 S.C. 818]. Instead, the courts
would have to decide if the procedure that
was followed infringed upon the right to a
fair
and
reasonable
procedure,
independent of the outcome. In compliance
with this line of thought, the courts have
read the principles of natural justice into
an enactment to save it from being declared
unconstitutional on procedural grounds
[See Olga Tellis v. Bombay Municipal
Corporation: (1985) 3 SCC 545; C.B.
Gautam v. Union of India:(1993) 1 SCC
78; Sahara India (Firm), Lucknow v.
Commissioner of Income Tax, Central-I:
(2008) 14 SCC 151 and Kesar Enterprises
v. State of Uttar Pradesh: (2011) 13 SCC
733]. Secondly, natural justice principles
breathe reasonableness into the procedure.
Responding to the argument that the
principles of natural justice are not static
but are capable of being moulded to the
circumstances, it was held that the core of
natural justice guarantees a reasonable
procedure
which
is
a
constitutional
requirement entrenched in Articles 14, 19
and
21.
The
facet
of audi
alterum
partem encompasses the components of
notice, contents of the notice, reports of
inquiry, and materials that are available
for perusal. While situational modifications
are permissible, the rules of natural justice
cannot be modified to suit the needs of the
situation to such an extent that the core of
the principle is abrogated because it is the
core
that
infuses
procedural
reasonableness. The burden is on the
applicant to prove that the procedure that
was followed (or not followed) by the
adjudicating authority, in effect, infringes
upon the core of the right to a fair and
reasonable hearing."

14. The judgement of the Supreme
Court in State Bank of India and others
v. Rajesh Agarwal and others reported in
(2023) 6 SCC 1 further expanded the said
principles, extract of which is provided
below:

"36. We need to bear in mind that
the principles of natural justice are not
mere legal formalities. They constitute
substantive obligations that need to be
followed
by
decision-making
and
adjudicating authorities. The principles of
natural justice act as a guarantee against
arbitrary action, both in terms of procedure
and substance, by judicial, quasi-judicial,
and
administrative
authorities.
Two
fundamental principles of natural justice
are entrenched in Indian jurisprudence: (i)
11 All. Agmotex Fabrics Pvt. Ltd. Vs. State of U.P. & Ors.
115
nemo judex in causa sua, which means that
no person should be a judge in their own
cause; and (ii) audi alteram partem, which
means
that
a
person
affected
by
administrative, judicial or quasi-judicial
action must be heard before a decision is
taken.
The
courts
generally
favor
interpretation of a statutory provision
consistent with the principles of natural
justice because it is presumed that the
statutory authorities do not intend to
contravene fundamental rights. Application
of the said principles depends on the facts
and circumstances of the case, express
language and basic scheme of the statute
under which the administrative power is
exercised, the nature and purpose for
which the power is conferred, and the final
effect of the exercise of that power."

15. The Supreme Court in a very
recent judgement in Singrauli Super
Thermal Power Station v. Ashwani
Kumar Dubey and others (Civil Appeal
No.3856/2022 decided on July 5, 2023)
once
again
examined
in
detail
the
principles of natural justice and after
placing reliance on the judgement in
Madhyamam
Broadcasting
Limited
(supra) held as follows:

15. A reading of the above,
clearly indicates that the NGT is a judicial
body and therefore exercises adjudicatory
function.
The
very
nature
of
an
adjudicatory function would carry with it
the requirement that principles of natural
justice are complied with, particularly
when there is an adversarial system of
hearing of the cases before the Tribunal or
for that matter before the Courts in India.
The NGT though is a special adjudicatory
body constituted by an Act of Parliament,
nevertheless, the discharge of its function
must be in accordance with law which
would also include compliance with the
principles of natural justice as envisaged in
Section 19(1) of the Act.

16. In this context, it would be
useful to refer to what is known as the
'official notice' doctrine, which is a device
used in administrative procedure. Although
an authority can rely upon materials
familiar to it in its expert capacity without
the need formally to introduce them in
evidence, nevertheless, the parties ought to
be informed of materials so noticed and be
given an opportunity to explain or rebut
them. The data on which an authority is
acting must be apprised to the party
against whom the data is to be used as such
a party would then have an opportunity not
only to refute it but also supplement,
explain or give a different perspective to
the facts upon which the authority relies.
This has been explained by Schwartz in his
work on Administrative Law. The aforesaid
doctrine applies with greater force to a
judicial / adjudicatory body.

Therefore, applying the aforesaid
principle to the cases that come up before
the NGT, if the NGT intends to rely upon
an expert Committee report or any other
relevant material that comes to its
knowledge, it should disclose in advance to
the party so as to give an opportunity for
discussion and rebuttal. Thus, factual
information which comes to the knowledge
of NGT on the basis of the report of the
Committee constituted by it, if to be relied
upon by the NGT, then, the same must be
disclosed to the parties for their response
and a reasonable opportunity must be
afforded to present their observations or
comments on such a report to the Tribunal.

17. It is needless to observe that
the experts' opinion is only by way of
assistance in arriving at a final conclusion.
But we find that in the instant case the
report of the expert Committee as well as
116 INDIAN LAW REPORTS ALLAHABAD SERIES
the recommendations have been made the
basis of the directions and such an
approach is improper.

16. The Division Bench of this Court
in S.R. Cold Storage v. Union of India
and Others reported in 2022 SCC online
(All) 550; {[2022] 448 ITR 37 (All)} has
also held as follows:

"25. The first and foremost
principle of natural justice is commonly
known as audi alteram partem rule. It says
that no one should be condemned unheard.
Notice is the first limb of this principle. It
must be precise and unambiguous. It
should appraise the party determinatively
the case he has to meet. Time given for the
purpose should be adequate so as to enable
him to make his representation. In the
absence of a notice of the kind and
reasonable opportunity, the order passed
becomes wholly vitiated. Thus, it is but
essential that a party should be put on
notice of the case before any adverse order
is passed against him. It is an approved
rule of fair play.

26. The principles of natural
justice are those rules which have been laid
down by the courts as being the minimum
protection of the rights of the individual
against the arbitrary procedure that may
be adopted by a judicial, quasi-judicial and
administrative authority while making an
order affecting those rights. These rules are
intended to prevent such authority from
doing injustice. Even an administrative
order which involves civil consequences
must be consistent with the rules of natural
justice.

27.
The
expression
"civil
consequences" encompasses infraction of
not merely property or personal rights but
of civil liberties, material deprivations, and
non-pecuniary
damages.
In
its
wide
umbrella comes everything that affects a
citizen in his civil life.

28. Natural justice has been
variously defined by different judges, for
instance a duty to act fairly, the substantial
requirements of justice, the natural sense of
what is right and wrong, fundamental
justice and fair-play in action. Over the
years by a process of judicial interpretation
two
rules
have
been
evolved
as
representing the principles of natural
justice in judicial process, including
therein quasi-judicial and administrative
process. They constitute the basic elements
of a fair hearing, having their roots in the
innate sense of man for fair-play and
justice which is not the preserve of any
particular race or country but is shared in
common by all men. The first rule is "nemo
judex in causa sua" or "nemo debet esse
judex in propria causa sua" that is no man
shall be a judge in his own cause. The
second rule is "audi alteram partem", that
is, "hear the other side". A corollary has
been deduced from the above two rules and
particularly the audi alteram partem rule,
i. e., "he who shall decide anything without
the other side having been heard, although
he may have said what is right, will not
have been what is right" or in other words,
as it is now expressed, "justice should not
only be done but should manifestly be seen
to be done". Natural justice is the essence
of fair adjudication, deeply rooted in
tradition and conscience, to be ranked as
fundamental. The purpose of following the
principles
of
natural
justice
is
the
prevention of miscarriage of justice."

17. One may also refer to a judgement
in M/s Eastern Machine Bricks and Tiles
Industries v. State of U.P. and Others,
Neutral
Citation
No.-2024:AHC:3222
penned by one of us while sitting in Single
Bench, wherein the Court, after examining
11 All. Agmotex Fabrics Pvt. Ltd. Vs. State of U.P. & Ors.
117
the umpteen judgements in relations to the
principles of natural justice, held as
follows:

10. The common thread that runs
across these judgments is that although the
principle of audi alteram partem can
evolve
itself
given
the
facts
and
circumstances of each case, its significance
and applicability is universal. Audi alteram
partem, which is a part of the doctrine of
natural justice, finds its roots primarily in
the constitutionally guaranteed ideal of
equality. This principle ensures that no one
is condemned, penalized, or deprived of
their rights without a fair and reasonable
opportunity of hearing. It acts as a
safeguard
against
arbitrary
decisionmaking, upholding the principle of due
process while also providing a crucial
foundation for just and equitable legal or
administrative proceedings.

11. Furthermore, the significance
of the principal of audi alteram partem is
deeply entrenched in the foundational
tenets of natural justice. The phrase,
denoting
"hear
the
other
side,"
is
emblematic of the sacrosanct right vested
in individuals to be accorded a fair and
impartial hearing before the adjudication
of their rights or interests. This cardinal
principle operates as a bulwark against
arbitrariness and the capricious exercise of
authority, mandating that decisions be
reached
only
subsequent
to
a
comprehensive and equitable deliberation
of all relevant contentions.