FAG PRECISION BEARINGS versus SALES TAX OFFICER (I) AND ANR.

Citation: [1996] SUPP. 9 S.C.R. 678 · Decided: 09-12-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
FAG PRECISION BEARINGS 
v. 
SALES TAX OFFICER (I) AND ANR. 
DECEMBER 9, 1996 
B 
[S.P. BHARUCHA AND S.C. SEN, JJ] 
Sales Tax: 
Gujarat Sales Tax Act 1969: Section 42(1). 
c 
Gujarat Sales Tax Rules, 1970 : Rule 37-A. 
Central Sales Tax Act, 1956: Section 9(2). 
Sales tax-Assessment proceedings--Power to stay-Conditio11 for ex:er-
D cise of-Assessment proceedings of appe//ant-assessee stayed-Grou11d that 
some more time would be taken and proceedings were not likely to be 
completed withi11 prescribed limit-Held not a valid reaso1t-Stay has conse-
quences of a civil nature upon assesse,,.....Power to stay should be exercised 
only in extraordinary circumstances-Authority should put in writing the 
reasons and circumstances that necessitate the stay of proceedings-Show 
E cause notice should be served on the assessee. 
F 
Administrative Law : 
Natural Justice-Sa/es Ta:r--Assessment proceedings--Power of 
authorities to st~Should not be exercised without issuing show cause notice 
to assessee. 
The Deputy Commissioner of Sales Tax passed an order dated 31st 
August, 1987 under section 42(1) of the Gujarat Sales Tax Act, 1969 read 
with Rule 37-A of the Gujarat Sales Tax Rules, 1970. Under this order the 
G appellant's assessments for the period 1st September, 1976 to 31st August, 
1984 were stayed until 31st August, 1988. The reasons given in support of 
the order were that the assessment was in progress and some more tipte 
would be taken and that assessment proceedings were not likely to · be 
completed within the time limit prescribed. 
H 
The appellant-assessee filed a writ petition in the Gujarat High 
678 
FAG PRECISION BEARINGS v. S.T.O. (I) fBHARUCHA, J.] 
679 
Court challenging the order contending that (i) the impugned order was A 
null and void because neither a show cause notice was issued to it nor was 
it given an opportunity of hearing; and (ii) reasons given in support of the 
order do not justify its passing. 
A Division Bench of the High Court upheld the impugned order 
B 
holding that the only requirement of the principles of natural justice was 
that reasons for passing the order had to be recorded and that order had 
to be served upon the assessee; but the authority was under no obligation 
either to issue a prior notice or to give the assessee an opportunity of 
hearing. The assessee preferred appeal before this Court. 
c 
Allowing the appeal, this Court 
HELD: 1. Under the terms of Rule 37-A, of Gujarat Sales Tax Rules, 
the Commissioner must put the reasons and circumstances necessitating 
stay of assessment pro~eedings in writing. The power to stay assessment 
proceedings can be exercised only in extra-ordinary circumstances and for D 
supervening reasons which cannot be attributed to the default or failure 
. of the assessing authorities. It is not enough that the order should state, 
as has been done in the present case, that the assessment proceedings were ·I 
pending and would take some more time. To accept the aforesaid as good 
reason to stay assessment proceedings is to hold that the Commissioner E 
or the State Government can give a go-by to the statutory provision 
prescribing the period during which assessment proceedings shall be 
• 
completed only because the sales tax authorities have not completed the 
' 
assessment proc•edings within the stipulated time. Hence this cannot be 
accepted as a good reason. [683-H; 684-A-D] 
F 
2. The stay of assessment proceedings has consequences of a civil 
nature upon an assessee. The more the time that elapses the more difficult 
it is for the assessee to prove his accounts and claim set off, exemptions 
and the like. Therefore, the power under Rule 37-A may not be exercised 
by the Commissioner without first giving to the assessee notice to show G 
cause why his assessment proceedings should not be stayed for a stated 
period. The notice should set out what the reasons and circumstances are 
which, according to the Commissioner, necessitate such stay so that the 
assessee has the opportunity of meeting the same. This is a requirement 
of natural justice that, having regard to the scope of Rule 37-A, requires 
to be read into it. (684-E-G] 
H 
680 
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R. 
A 
3. In the instant case, notice had not been served npon the assessee. 
In the premises, the impugned order must be set aside. Consequently, all 
proceedings taken and assessment orders passed on the strength thereof 
are also set aside. However, the Com

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