2023 (7) TMI 96 - HC - GST

GST Tax Order Quashed: Procedural Flaws Invalidate Demand Against Hardware Dealer, Directs Fresh Assessment

HC allowed writ petition challenging GST tax order, quashing the original demand against a hardware dealer. The court found procedural irregularities in ... Principles of natural justice - Opportunity of personal hearing - Quashing and remand for fresh consideration - Admission and verification of documentary evidence (invoice, e-way bill, payment details) - Recovery and penalty for wrongful availing of input tax credit under GSTPrinciples of natural justice - Opportunity of personal hearing - Quashing and remand for fresh consideration - Whether the impugned order confirming recovery and penalty could be sustained where no personal hearing was afforded to the petitioner after issuance of the show cause notice. - HELD THAT: - The Court found that although a show cause notice had been issued, no personal hearing was provided to the petitioner after the show cause notice either on the portal or by post. This amounted to a denial of an opportunity to put forward the petitioner's case and to produce documents which could rebut the factual basis of the demand. In the absence of such hearing, the order confirming recovery and imposition of penalty was held to be arbitrary and in breach of the principles of natural justice. Accordingly the impugned order was set aside and the matter was remitted to the respondent for fresh consideration after affording the petitioner an opportunity to produce the specified documents and be heard. [Paras 3, 5, 6]Impugned order set aside and matter remitted for fresh consideration after affording personal hearing and opportunity to produce documents.Admission and verification of documentary evidence (invoice, e-way bill, payment details) - Recovery and penalty for wrongful availing of input tax credit under GST - Whether the petitioner could disprove the allegation of inward supplies from a non-existent supplier by production of documents and whether the respondent must verify such documents on remand. - HELD THAT: - The Court recorded that the factual premise for the demand - that the supplier was non-existent - was disproved by material showing the supplier's GST registration and filing of returns. The petitioner was directed to produce copies of invoice, e-way bill and payment details within one week of receipt of the order. The respondent was directed to verify those documents and pass a fresh order within six weeks thereafter. The remand was for verification and fresh consideration of the claim and penalty in light of the documentary evidence and submissions to be placed by the petitioner. [Paras 4, 5, 6]Petitioner to produce specified documents within one week; respondent to verify and decide afresh within six weeks.Final Conclusion: Writ petition allowed; impugned order setting up recovery and equal penalty set aside and remitted for fresh consideration after affording the petitioner personal hearing and an opportunity to furnish and have verified the invoice, e-way bill and payment details; no costs. Issues involved:The issues involved in the judgment are regarding the issuance of a Writ of Certiorarified Mandamus to quash an order related to GST tax period 2018-19, alleging illegality and arbitrariness, and seeking a fresh order after affording a reasonable opportunity of being heard to the petitioner.Details of the Judgment:1. The petitioner, a hardware dealer with GST registration, received an order from the respondent stating that he had availed input tax credit from a non-existent taxpayer named Sun Steels, resulting in a demand for recovery of Rs. 71,604 along with a penalty. The petitioner claimed that he did not receive a notice of personal hearing after the show cause notice, thus alleging a violation of principles of natural justice. 2. The petitioner contended that Sun Steels is a legitimate firm with GST registration, having filed returns and paid taxes for supplies made to the petitioner. During the hearing, it was revealed that the basis for the show cause notice, i.e., the non-existence of Sun Steels, was disproved as Sun Steels was indeed a registered entity paying taxes. The petitioner was not given an opportunity to present this information, leading to the impugned order being set aside.3. The High Court allowed the writ petition, setting aside the impugned order and remitting the matter back to the respondent for fresh consideration. The petitioner was directed to submit necessary documents within a week, including invoice copies, e-way bill copies, and payment details, for the respondent's review within six weeks. No costs were awarded, and connected miscellaneous petitions were closed as a result of the judgment.