Court finds breach of natural justice in tax order issuance under Section 129(3) - fresh hearing mandated

The High Court found a violation of natural justice principles in a case involving the passing of an order under Section 129(3) without affording the applicant a proper opportunity to be heard. Despite the applicant's detailed response, the order was issued prematurely, disregarding the scheduled personal hearing. The Court emphasized the necessity of a meaningful opportunity to present arguments before determining tax and penalties. Consequently, the Court quashed the order and instructed a fresh consideration with a new hearing opportunity for the applicant to ensure a fair decision-making process.

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Issues:
Violation of principles of natural justice in passing the order under Section 129(3) of the Act without giving a meaningful opportunity of being heard.

Analysis:
The writ applicant, engaged in the business of manufacturing chemical products, filed a writ application under Article 226 of the Constitution of India seeking various reliefs. The case arose when a consignment of CPC Blue was being transported from one factory to another within the same company. The goods were detained by the respondent's mobile squad on the grounds of e-way bill non-compliance. The applicant deposited a significant amount with the respondent to secure the release of the goods and conveyance. Subsequently, a notice under Section 129(3) of the Act was issued, demanding tax and penalty payment. The applicant argued that as it was an intra-state branch transfer, no GST liability was applicable. However, the respondent passed an order confirming tax and penalty without giving the applicant an opportunity of a personal hearing scheduled for a later date.

The High Court noted a violation of the principles of natural justice in the proceedings. Despite the applicant's detailed written reply, the order was passed before the scheduled date of the personal hearing, indicating a lack of consideration of the applicant's arguments. The respondent contended that since the amount was deposited on the seizure date, no further hearing was necessary. However, the Court rejected this explanation, emphasizing the importance of a meaningful opportunity of being heard as mandated by the statute. The Court highlighted that no tax, interest, or penalty should be determined without providing such an opportunity, which must be substantial and not merely procedural.

Consequently, the Court quashed the impugned order dated 02.07.2019 and remitted the matter back to the respondent for fresh consideration. The respondent was directed to provide a new hearing opportunity to the applicant, consider all submissions, and pass an appropriate order in accordance with the law. The writ application was allowed, and the impugned order was set aside, ensuring that the applicant receives a fair chance to present their case before any further decision is made.

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