2023 (5) TMI 1071 - HC - GST

Tax Appeals Reinstated: Procedural Fairness Prevails with Opportunity for Fresh Hearing and Objection Filing Under W.B.G.S.T. Act

Subodh Kumar Mondal Versus State of West Bengal & Ors.

HC addressed appeals under W.B.G.S.T. Act challenging tax orders due to lack of personal hearing. Despite recovery of tax amount and appellant's failure ... Validity of orders passed under Section 74(9) of the W.B.G.S.T. Act, 2017 - appealable order or not - appellant did not choose to file appeals but approached the learned Writ Court on the ground that opportunity of personal hearing has to be mandatorily granted in terms of Section 75(4) of the Act - principles of natural justice - HELD THAT:- Considering the peculiar facts situation in the instant case, namely that by way of a third party garnishee order, the entire tax demanded from the appellant have been recovered, it is opined that the revenue will not be prejudiced if a fresh opportunity of personal hearing is granted to the appellant to put forth his submissions - submission of the learned advocate appearing for the respondents/State is that the interest of the revenue should be protected. The interest of the revenue has been sufficiently protected inasmuch as the entire tax demanded under the three impugned orders have been fully recovered by way of garnishee proceedings. The writ petitions as well as these appeals are disposed of by directing the appellant to treat the orders under Section 74(9) of the W.B.G.S.T. Act, 2017, which were impugned in the writ petitions as the show-cause notice and the appellant is directed to file his objections to the notice within 15 days from the date of receipt of server copy of this judgement and order. 1. ISSUES PRESENTED AND CONSIDERED * Whether orders passed under Section 74(9) of the W.B.G.S.T. Act, 2017 (impugned orders) are vitiated for want of personal hearing where Section 75(4) is said to mandate personal hearing. * Whether invocation of writ jurisdiction was appropriate despite the availability of statutory appeal against the impugned orders and, if so, what relief is permissible. * Whether the fact that the tax demand (excluding penalty and interest) has been recovered by garnishee proceedings affects entitlement to relief and the protection of revenue. * The consequences and appropriate remedy where a fresh opportunity of personal hearing is directed after recovery by garnishee - including treatment of recovered amounts and interim measures (de-freezing of bank account). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of impugned orders for alleged denial of personal hearing under Section 75(4) Legal framework: Section 75(4) of the Act (as relied upon) prescribes an opportunity of personal hearing in relevant proceedings; orders impugned were passed under Section 74(9) of the Act. Precedent treatment: No precedent was invoked by the Court in the judgment; the Court considered statutory text and factual compliance with hearing notices. Interpretation and reasoning: The Court examined whether opportunity of personal hearing was afforded. The respondents produced evidence that notice fixing hearing dates (14.03.2022 and adjourned to 25.03.2022) was issued and the appellant failed to appear on both dates. The appellant countered that the show-cause notice dated 28.09.2022 recorded 'personal hearing: not applicable.' The Court treated the impugned orders as akin to a show-cause notice for purposes of granting a fresh opportunity. Considering the factual matrix and statutory right to be heard, the Court concluded that fairness required affording a personal hearing before final adjudication. The Court therefore directed that the impugned orders be treated as the show-cause notice and afforded a fresh personal hearing within a specified timeframe. Ratio vs. Obiter: Ratio - where a statutory opportunity of personal hearing is claimed to be mandatory and the factual record shows either non-appearance or an ambiguity in notice, the Court may direct that the impugned order be treated as a show-cause notice and order a fresh hearing. Obiter - peripheral comment that notice initially fixed and non-appearance influences outcome. Conclusion: The Court ordered a fresh opportunity of personal hearing to be afforded and directed the appellant to file objections within 15 days, with the concerned Deputy Commissioner to pass fresh orders on merits in accordance with law. Issue 2: Appropriateness of writ relief despite statutory appeal being available Legal framework: The existence of a statutory appeal against orders under the Act was acknowledged; writ jurisdiction was invoked by the appellant instead of filing the statutory appeal. Precedent treatment: The Court did not rely on or distinguish any prior authority about availability or propriety of writ jurisdiction where appeals exist; it exercised discretionary equitable relief based on factual considerations. Interpretation and reasoning: The Court noted that the impugned orders are appealable but considered the writ petitions because of the asserted denial of personal hearing and the specific remedial needs arising from garnishee recovery. Rather than dismissing the writs for alternative remedy, the Court addressed the substantive fairness concern by directing a fresh hearing and fresh decision-making process. The Court balanced procedural propriety with substantive justice, particularly given recovery had already occurred via garnishee. Ratio vs. Obiter: Ratio - where alternative statutory remedies exist, the Court may still entertain writs to secure mandatory procedural rights (such as personal hearing) and to fashion appropriate relief when factual exigencies (e.g., garnishee recovery) make such relief necessary. Obiter - general remarks about appealability. Conclusion: The Court granted writ relief limited to ordering fresh hearing and fresh adjudication, rather than setting aside the impugned orders outright or directing appellate pathways. Issue 3: Effect of garnishee recovery on entitlement to relief and protection of revenue Legal framework: Principles balancing a taxpayer's right to be heard against the revenue's interest in recovery; garnishee proceedings had fully recovered the tax amounts demanded (excluding penalty and interest). Precedent treatment: No case law cited; the Court proceeded on factual and equitable principles. Interpretation and reasoning: The Court accepted the submission that the revenue's interest must be protected but found that protection was achieved because the tax component had already been recovered by garnishee. Given that recovery, the Court considered it appropriate to grant a fresh personal hearing without prejudice to the revenue; it expressly provided that amounts already recovered shall abide by the fresh orders to be passed. Thus, the recovery did not bar relief but shaped its form - enabling a fresh adjudication while safeguarding the revenue's financial position. Ratio vs. Obiter: Ratio - where statutory procedural infirmity is established or reasonably alleged and the tax component has already been recovered, a tribunal/court can order a fresh hearing and permit recovered amounts to be adjusted in accordance with the fresh adjudication. Obiter - comments on adequacy of protection when only penalty and interest remain outstanding. Conclusion: Recovery by garnishee justified granting a fresh hearing without prejudice to the revenue; recovered sums to be dealt with pursuant to the fresh orders. Issue 4: Consequential relief - treatment of impugned orders as show-cause notice, de-freezing of bank account, and directions for fresh decision Legal framework: Judicial power to fashion effective relief to secure statutory rights to be heard and to ensure adjudication in accordance with law; ancillary relief touching accounts and treatment of recovered amounts. Precedent treatment: No authorities cited; Court exercised equitable jurisdiction to structure relief. Interpretation and reasoning: To give effect to the right to be heard, the Court directed the appellant to treat the impugned Section 74(9) orders as the show-cause notice and to file objections within 15 days from receipt of the certified copy. The Deputy Commissioner was directed to afford a personal hearing to the appellant or authorised representative and pass fresh orders on merits and in accordance with law. Because the tax component had been recovered, the Court concluded the revenue was not prejudiced and therefore ordered that the bank account be de-frozen. The Court further directed that amounts already recovered by garnishee shall abide by the fresh orders, thereby enabling adjustments or refunds if appropriate following fresh adjudication. Ratio vs. Obiter: Ratio - courts may convert an impugned adjudicatory order into a proceeding-starting document (show-cause) for purposes of remedying denial of hearing and may direct consequential administrative acts (e.g., de-freezing) where recovery secures the revenue. Obiter - the specific time period (15 days) and de-freezing direction are case-specific measures. Conclusion: The Court ordered that the impugned orders be regarded as show-cause notices, directed filing of objections within 15 days, ordered a fresh personal hearing and fresh adjudication by the Deputy Commissioner, directed that recovered amounts abide by such fresh orders, and directed de-freezing of the bank account; no order as to costs.