Tax Demand Proceedings Set Aside Due to Improper Ocean Freight Inclusion and Denial of Personal Hearing Rights

The HC set aside DRC-07 proceedings against a private company for alleged turnover suppression spanning 2017-20. The proceedings improperly included demands for ocean freight tax despite an existing court order staying such recovery. The court found the petitioner was denied proper personal hearing opportunities despite participating in inspections and providing documentation. The matter was remanded to the first respondent for reevaluation with directions to conduct proper hearings and comply with law. The HC disposed of the writ petition without costs, emphasizing the need for fair opportunity for the petitioner to present its case.

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Issues:
Challenge to DRC-07 proceedings dated 10.2.2022 for the years 2017-18, 2018-19, and 2019-20 under Article 226 of the Constitution of India.

Analysis:
The petitioner, a Private Limited Company, challenged the DRC-07 proceedings initiated by the 2nd respondent, authorized by the 1st respondent, for alleged turnover suppression. The petitioner participated in inspections, provided necessary documents, and disputed the issues raised. Show-cause notices were issued, proposing significant tax liabilities under IGST, CGST, and SGST for the three years. The petitioner contested the notices, attended personal hearings, and raised objections, particularly regarding alleged non-payment of tax on ocean freight.

The petitioner had previously challenged the levy of IGST on ocean freight in a separate writ petition, resulting in a court order directing authorities not to take coercive steps for recovery. Despite this, the DRC-07 proceedings dated 10.02.2022 included a demand for ocean freight payment, contradicting the previous court order. The petitioner's counsel argued that demanding payment despite the court order was improper and highlighted the lack of a personal hearing during the proceedings.

The Government Pleader for Commercial Taxes defended the proceedings, stating that objections were considered, and the alleged paid ocean freight was credited, causing no loss to the petitioner. However, the petitioner's counsel raised concerns about the potential collection of ocean freight despite the court order staying the same. The court, after considering the arguments, set aside the DRC-07 proceedings and remanded the matter back to the first respondent for reevaluation, emphasizing the need for a proper personal hearing and compliance with the law.

In conclusion, the court disposed of the writ petition with specific directions for the first respondent to reexamine the matter, ensuring a fair opportunity for the petitioner to present their case. No costs were awarded, and related pending petitions were closed accordingly.

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