2023 (2) TMI 281 - HC - Insolvency and Bankruptcy

Court quashes Assessment Order for violating natural justice, directs reconsideration

The Court found that the Assessment Order violated principles of natural justice by not granting a personal hearing to the petitioner and failing to ... Principles of natural justice - opportunity of hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - moratorium - order of NCLAT - remand for fresh consideration - keeping assessment proceedings in abeyancePrinciples of natural justice - opportunity of hearing - Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017 - Whether the impugned assessment order violated principles of natural justice by not granting a personal hearing as requested under Section 75(4) of the TNGST Act, 2017. - HELD THAT: - The Court found on the material on record that the petitioner had made a written request for personal hearing in its replies but no personal hearing was afforded in the impugned assessment proceedings. Section 75(4) requires that an opportunity of hearing be granted where such a request in writing is received or an adverse decision is contemplated. Failure to grant the requested personal hearing amounted to violation of the principles of natural justice. Consequently, the impugned assessment order could not stand and required quashing and remittance for fresh consideration after affording a personal hearing. [Paras 20, 21, 22]Impugned assessment order quashed for violation of natural justice; matter remanded for fresh consideration after affording a personal hearing.Moratorium - order of NCLAT - remand for fresh consideration - Whether the respondent failed to consider the petitioner's contention that the NCLAT order dated 15.10.2018 (claimed to be akin to a moratorium) precluded continuation of assessment proceedings. - HELD THAT: - The Court recorded that the petitioner had relied upon the NCLAT order and had raised this contention in its replies, but the assessing authority did not consider that contention in the impugned assessment order. The High Court did not express any view on the merits of whether the NCLAT order is equivalent to a moratorium under Section 14 of the IBC; instead the matter was remitted to the respondent to examine and decide the petitioner's contention on merits. The remand is for fresh consideration of that specific contention and any consequential determination required in accordance with law. [Paras 18, 19, 22]Contention regarding the NCLAT order not considered by the respondent; issue remanded to the respondent for fresh consideration on merits.Keeping assessment proceedings in abeyance - Whether the assessment proceedings should be kept in abeyance pending the outcome of the petitioner's reliance on the NCLAT order. - HELD THAT: - The Court rejected the petitioner's request to direct that assessment proceedings be kept in abeyance. It held that the question of abeyance is for the respondent to decide after considering the petitioner's contention regarding the NCLAT order. The Court directed the respondent to afford a personal hearing and pass a reasoned final order within twelve weeks from receipt of the judgment. [Paras 23]Request to keep proceedings in abeyance rejected; respondent to consider abeyance issue and pass final orders after personal hearing within twelve weeks.Remand for fresh consideration - Whether consequential recovery notice issued pursuant to the quashed assessment order should stand. - HELD THAT: - Because the impugned assessment order was quashed and remanded for fresh consideration, the consequential recovery notice arising from that order was also quashed. The matter therefore requires fresh adjudication by the respondent consistent with the directions to afford personal hearing and consider the petitioner's contentions, including any claim based on the NCLAT order. [Paras 22, 24]Consequential recovery notice quashed in view of quashing of the impugned assessment order; matter to be reconsidered afresh.Final Conclusion: The impugned assessment order is quashed for breach of natural justice and remitted to the assessing authority for fresh consideration on merits after affording a personal hearing; the request to keep proceedings in abeyance was declined and the consequential recovery notice is quashed. The respondent is directed to pass final orders after hearing the petitioner within twelve weeks. Issues:Challenge to Assessment Order and Recovery Notice based on non-application of mind, lack of personal hearing, violation of principles of natural justice.Analysis:1. The petitioner challenged the Assessment Order and consequential recovery notice based on several grounds. Firstly, it was argued that the Assessment Order was erroneous due to the respondent's failure to consider a moratorium order passed by the NCLAT, similar to one under the Insolvency and Bankruptcy Code. The petitioner had explicitly referred to this order in their replies, but it was allegedly ignored in the Assessment Order.2. Another contention was the lack of a personal hearing, which was requested by the petitioner but not granted, violating Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017. The petitioner claimed that the Assessment Order was passed in violation of the principles of natural justice.3. The petitioner's counsel highlighted the NCLAT's order, emphasizing that the Assessment Proceedings should not have proceeded in light of the moratorium order. The order was compared to a moratorium order under the Insolvency and Bankruptcy Code, 2016, indicating that the Assessment Order was procedurally incorrect.4. The respondent argued that the petitioner had an alternative statutory appellate remedy available and contended that the NCLAT's order was not equivalent to a moratorium order under the Insolvency and Bankruptcy Code. The respondent maintained that the NCLAT's order was based on the Companies Act, 2013, not the Insolvency and Bankruptcy Code.5. The respondent also disputed the relevance of a Calcutta High Court judgment cited by the petitioner, asserting that it did not apply to the present case as there were no Corporate Insolvency Resolution Process proceedings pending against the petitioner. The respondent argued that the Assessment Proceedings were not required to be stayed based on the NCLAT's order.6. Ultimately, the Court found that the Assessment Order violated principles of natural justice by not granting a personal hearing to the petitioner and failing to consider the petitioner's contentions regarding the NCLAT's order. The Court quashed the Assessment Order and directed the respondent to reconsider the matter, ensuring adherence to natural justice principles and granting a personal hearing to the petitioner within twelve weeks. The consequential recovery notice was also quashed in line with the Assessment Order's quashing.