2020 (12) TMI 685 - HC - GST

High Court sets aside tax demand, emphasizes statutory compliance & natural justice under GST Act

The High Court allowed the writ petition, setting aside the tax demand and interest orders passed by the respondents. The Court emphasized the importance ... Natural justice - service of show cause notice - reasoned order quantifying demand - dismissal of appeal on grounds of limitation - fresh adjudication after opportunity of hearing - remand for fresh considerationService of show cause notice - natural justice - reasoned order quantifying demand - Validity of impugned demand order and appellate order in view of non service of show cause notice and non furnishing of a reasoned order. - HELD THAT: - The Court found on the respondents' own admission that the show cause notice was sent to a wrong e mail address and, therefore, was never validly served on the petitioner. No reasoned order quantifying the demand was furnished to the petitioner; only a summary of the order was placed on record. Service at a wrong e mail address cannot be regarded as proper service under the statutory scheme. Because the petitioner was deprived of an opportunity to file a reply and was not furnished the reasons for quantification of the demand, the statutory procedure and principles of natural justice were violated. Consequently the impugned demand order and the appellate order, which proceeded without such service and reasoned communication, are arbitrary and cannot stand.The orders imposing the tax demand and the appellate order dismissing the appeal were set aside on the ground of violation of principles of natural justice due to non service of the show cause notice and non furnishing of a reasoned order.Remand for fresh consideration - fresh adjudication after opportunity of hearing - Procedural course to be followed after setting aside the impugned orders. - HELD THAT: - Having set aside the earlier orders for procedural infirmity, the Court permitted the show cause notice (now on record) to be replied to by the petitioner within a fixed time. The respondents were granted liberty to pass fresh orders after giving the petitioner an opportunity of hearing and in accordance with law. The order constitutes a remand for fresh consideration rather than an adjudication on the merits of the tax demand itself.Petitioner to file reply to the show cause notice within four weeks; respondents to consider and pass fresh orders after affording opportunity of hearing in accordance with law.Final Conclusion: Writ petition allowed: the order dated 24.1.2019 imposing the tax demand and the appellate order dated 27.7.2020 are set aside for breach of natural justice; matter remitted for fresh adjudication after service and opportunity of hearing, with directions for the petitioner to file a reply within four weeks. Issues:Challenge to tax demand and interest under GST Act, dismissal of appeal on grounds of limitation, non-service of show cause notice, violation of principles of natural justice.Analysis:The petitioner, engaged in manufacturing and selling auto parts, challenged a tax demand of Rs. 91,450 and interest imposed by the respondent under GST DRC-07. The petitioner contended that no show cause notice was served before the demand order, and the subsequent appeal dismissal was based on limitation grounds. The petitioner claimed eligibility for input tax credit and alleged lack of receipt of any order prior to the demand notice.The Court noted the petitioner's argument regarding the absence of a show cause notice and reasoned order, calling for a counter affidavit from the respondents. The counter affidavit admitted sending the notice to the wrong email address due to clerical error. The absence of a reasoned order quantifying the demand was highlighted, indicating a violation of statutory provisions and principles of natural justice.Emphasizing that service at a wrong email address does not comply with the Act's requirements, the Court found the orders arbitrary and against the prescribed procedure. It concluded that the orders were in clear violation of natural justice principles due to the lack of proper notice and reasoning for the demand imposition.Consequently, the Court allowed the writ petition, setting aside the orders dated 24.1.2019 and 27.7.2020 passed by the respondents. The petitioner was directed to respond to the now-served show cause notice within four weeks, allowing the respondents to issue fresh orders after a hearing, ensuring compliance with legal procedures.The judgment highlighted the importance of adhering to statutory provisions and principles of natural justice in tax matters under the GST Act, ensuring proper notice, and reasoned orders to uphold fairness and procedural integrity.