2022 (6) TMI 466 - HC - GST

GST Order Set Aside After Authority Issued Decision Before Response Deadline Expired, Violating Natural Justice Principles

The HC allowed an appeal against a GST order that violated natural justice principles. The appellant received a show cause notice on 29.03.2022 with seven ... Principles of natural justice - Effective opportunity to be heard - Validity of action taken before expiry of prescribed time to reply - Treatment of an order as a show cause notice - Remand for fresh decision on merits after personal hearing - Maintenance of bank guarantee pending final adjudication - Exercise of power under Section 129(3) in relation to detention/seizurePrinciples of natural justice - Effective opportunity to be heard - Validity of action taken before expiry of prescribed time to reply - Whether the order dated 31.03.2022 was vitiated for breach of principles of natural justice by being passed before the expiry of the time granted to the appellant to reply to the show cause notice. - HELD THAT: - The Court found that the appellant had been granted seven days to submit a reply to the show cause notice dated 27.03.2022 and, on the appellant's case, the notice was received on 29.03.2022. Even by reference to the notice date, the period to reply extended beyond 31.03.2022, yet the impugned order was passed on 31.03.2022. The court accepted the submission that an opportunity to show cause must be effective and not a mere formality. Having regard to these facts, the order passed before the expiry of the prescribed time for reply was held to be contrary to the requirements of fair hearing and therefore unsustainable.The order dated 31.03.2022 was set aside as violative of the principles of natural justice.Treatment of an order as a show cause notice - Remand for fresh decision on merits after personal hearing - Maintenance of bank guarantee pending final adjudication - Exercise of power under Section 129(3) in relation to detention/seizure - The procedural consequences and remedial directions to be given following the setting aside of the impugned order. - HELD THAT: - The Court directed that the order dated 31.03.2022 be treated as a show cause notice and that the appellant be permitted to file objections/reply within ten days from receipt of the court's order. The authority was directed, upon receipt of the reply, to afford a personal hearing to the appellant's authorised representative and to pass a fresh decision on merits and in accordance with law. Meanwhile, the bank guarantee furnished by the appellant was to be kept alive and remain operative until the final order is passed pursuant to these directions. These directions remand the matter for fresh consideration rather than deciding the merits of detention/seizure under the statutory provisions.The matter was remanded for fresh adjudication: the appellant to file reply within ten days, to be heard personally, and the authority to pass a fresh order; the bank guarantee to remain alive pending final orders.Final Conclusion: The appeal is allowed: the impugned order dated 31.03.2022 is set aside for breach of natural justice; the order is to be treated as a show cause notice, the appellant given ten days to reply, a personal hearing to be afforded and a fresh decision on merits to be taken by the authority; meanwhile the bank guarantee shall remain in force. Issues:Violation of principles of natural justice in passing the order dated 31.03.2022 under Section 129(3) of the GST Acts.Analysis:The High Court of Calcutta, comprising Hon'ble Justice T.S. Sivagnanam and Hon'ble Justice Hiranmay Bhattacharyya, heard an intra court appeal challenging an order dated 07.04.2022 passed in WPA 6146 of 2022. The appellant contended that the order dated 31.03.2022 under Section 129(3) of the GST Acts violated principles of natural justice. The Single Judge had dismissed the writ petition, directing the appellant to avail alternative remedy. The appellant argued that there was a violation of natural justice as they were granted seven days to reply to a show cause notice dated 27.03.2022, received late on 29.03.2022. The impugned order was issued on 31.03.2022, before the stipulated time limit, referencing objections filed by the appellant, which the appellant denied, stating it was a preliminary explanation letter. The Court found merit in the appellant's argument and set aside the order dated 31.03.2022.The Court emphasized that when an opportunity is given to show cause, it must be effective and not a mere formality. It noted that the revenue's interest was safeguarded by the release of goods upon furnishing a bank guarantee and bond. Therefore, the Court concluded that the appellant should be granted adequate opportunity to present their case, and the authority should decide accordingly. Consequently, the order passed in the writ petition and the order dated 31.03.2022 were set aside. The appellant was directed to treat the order dated 31.03.2022 as a show cause notice and submit objections/reply within ten days. The authority was instructed to provide a personal hearing to the appellant's representative and pass a fresh order based on merit and in accordance with the law. The bank guarantee was to be maintained until the authority's decision. The appeal was allowed, and the connected application was disposed of accordingly.