Court rules in favor of software company challenging CST Assessment Order, citing denial of natural justice.

The Court held in favor of the petitioner, a software and IT services company, in their challenge against the Assessment Order under the CST Act for the year 2015-16. The Court found that the petitioner was denied a proper opportunity for a personal hearing, violating principles of natural justice. Despite the existence of an alternative appeal remedy, the Court allowed the Writ Petition under Article 226, setting aside the Assessment Order and remitting the matter for fresh consideration after ensuring a proper personal hearing within two months.

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Issues:
Assessment Order challenge under CST Act for the year 2015-16, Denial of proper opportunity for personal hearing, Violation of principles of natural justice, Existence of alternative remedy of appeal.

Assessment Order Challenge under CST Act for the year 2015-16:
The petitioner, a Company engaged in Software sale and IT services, challenged the Assessment Order dated 31.03.2020 by the 1st respondent. The petitioner contended that the respondent adopted a gross turnover of Rs. 9475,63,11,243/- and proposed to levy tax at 14.5% without considering exemptions claimed for direct exports, branch transfers, and CST collections. The petitioner reported inter-State sales of software at Rs. 39,47,93,331/- taxed at 5%, but the respondent assessed it at 14.5%, creating an artificial liability. The petitioner also highlighted errors in turnover reporting, like unreported branch transfers and alleged absence of documentary evidence for non-sales. The petitioner filed rectification requests not acted upon by the respondent.

Denial of Proper Opportunity for Personal Hearing:
The petitioner's counsel argued that the Assessment Order was passed on the last day of the limitation period, denying adequate time for submissions. Despite lockdown due to COVID-19, the petitioner faced technical glitches preventing online responses and requested postponement of personal hearing. The Court noted that the impugned order was passed without providing a personal hearing during the lockdown, causing serious prejudice and violating principles of natural justice. Lack of time due to impending limitation expiration likely led to errors in the assessment order.

Violation of Principles of Natural Justice:
The Court held that the petitioner was denied a proper opportunity to represent its case, and principles of natural justice were violated. The first personal hearing was fixed during the lockdown, making it impossible for the petitioner to attend or submit online responses. This denial of opportunity and errors in the order necessitated setting aside the Assessment Order and remitting the matter for fresh consideration after a proper personal hearing.

Existence of Alternative Remedy of Appeal:
Although an alternative remedy of appeal under the CGST Act was available to the petitioner, the Court allowed the Writ Petition under Article 226 of the Constitution of India. The Court emphasized that the availability of an appeal remedy should not bar the petitioner from seeking relief through extraordinary jurisdiction. The impugned Assessment Order was set aside, and the matter was remitted back to the respondent for reevaluation after granting a personal hearing within two months.

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