2021 (1) TMI 59 - HC - GST

Court emphasizes fair procedures in tax assessments, quashes hasty orders, upholds natural justice

The Court found in favor of the petitioner, emphasizing the necessity of affording sufficient time for reply and upholding principles of natural justice ... Violation of principles of Natural Justice - validity of assessment orders - It is the case of the petitioner, that even though the representations given by the petitioner are reflected in the impugned assessment orders, the reason for rejection of the same has not been disclosed in the impugned assessment orders - Section 75 (5) of the Central Goods and Service Act, 2017 - HELD THAT:- It is clear from the Section 75 (5) of CGST Act that the respondent has got the power to grant further time to reply to the show cause notice if sufficient cause is shown by the dealer (assessee). The proviso also makes it clear that the respondent has got the power to grant three extensions to the dealer (assessee) for submission of reply. In the instant case, the reason for seeking extension of time by the petitioner to submit their reply was that they have to consult an Auditor with regard to the defects pointed out by the respondent in the show cause notice. When 33 defects have been pointed by the respondent for the assessment year 2017-18 and 38 defects for the assessment year 2018-19, and that too when spot inspection was conducted by the Enforcement Wing Officials of the respondent for a period of 22 days, this Court is of the considered view that the reason given by the petitioner for seeking extension of time to send reply to the show cause notice is a genuine one and they have shown sufficient cause for seeking extension. Admittedly, the respondent has also not considered, whether the reasons given by the petitioner is a genuine one or not in any of their correspondence or in the impugned assessment orders. As observed earlier, the show cause notice was issued on 11.10.2019 and the impugned assessment orders has been passed on 19.11.2019, within a very short span of time. This Court is of the considered view that principles of natural justice has been violated, as no proper reasons have been given by the respondent for rejecting the petitioner's request for extension of time to send a reply to the show cause notice and as seen from the impugned assessment orders, a fair hearing was also not afforded to the petitioner - the tax demand under the impugned assessment orders almost works out to ₹ 1 Crore. After giving due consideration to the same, this Court is of the considered view that the petitioner must be put on terms before the impugned assessment orders are quashed. The matter remanded back to the respondent for fresh consideration and the respondent shall pass final orders on merits and in accordance with law after affording sufficient opportunity to the petitioner - Petition allowed by way of remand. Issues:Challenging assessment orders under Tamil Nadu Goods and Services Tax Act, 2017 for assessment years 2017-2018 and 2018-2019.Detailed Analysis:1. Issue of Sufficient Opportunity for Reply:The petitioner received a show cause notice highlighting defects in monthly returns for both assessment years. The petitioner requested additional time to reply, citing the need to consult their Auditor. Despite sending representations seeking time, the respondent passed assessment orders hastily, without granting sufficient opportunity. The respondent's contention that personal hearing was offered but not availed does not justify the lack of time granted for a detailed response.2. Violation of Principles of Natural Justice:The respondent failed to provide reasons for rejecting the petitioner's requests for time extension in the assessment orders. The impugned orders were passed swiftly after the show cause notice, without proper consideration of the petitioner's representations. This lack of explanation and hasty decision-making violates the principles of natural justice.3. Legal Provisions and Precedents:Section 75(5) of the Central Goods and Services Tax Act, 2017 allows for granting time for reply if sufficient cause is shown, with a limit of three adjournments. The Court observed that the petitioner's reasons for seeking an extension were valid, considering the number of defects and the need for consultation with an Auditor. The judgment in Tvl. Steel Mart Private limited Vs. The Commercial Tax Officer supports the necessity of granting time for reply before passing assessment orders.4. Remedy and Judgment:The respondent's argument that statutory appeal is the only remedy is countered by the Court's finding of a violation of natural justice. The Court directed the petitioner to pay a specified sum to the respondent, following which the impugned assessment orders would be quashed. The matter was remanded back to the respondent for fresh consideration, emphasizing the need for affording the petitioner sufficient opportunity and a right to personal hearing.In conclusion, the judgment highlights the importance of providing adequate time for reply, explaining reasons for decisions, and upholding principles of natural justice in assessment proceedings under the Goods and Services Tax Act. The Court's decision to quash the assessment orders and remand the matter for reconsideration underscores the significance of fair procedures in tax assessments.