2023 (8) TMI 105 - HC - GST

Rectification petition allowed under Section 161 after finding denial of personal hearing violated natural justice principles

The HC allowed a rectification petition under Section 161, finding that the petitioner genuinely sought adjournment to furnish records and had identified ... Principles of natural justice - Rectification under Section 161 - Adjournment and recording of requests - proviso to Section 75(5) (limitation on adjournments) - Reassessment on deposit and timeline for completionAdjournment and recording of requests - proviso to Section 75(5) (limitation on adjournments) - Failure of the assessing authority to record and decide upon the adjournment letter and the entitlement of the assessee to one more opportunity despite the statutory limit on adjournments. - HELD THAT: - The Court found that an adjournment letter dated 10.11.2022 was submitted by the petitioner and received by the respondent, but the assessment order passed later that day does not record, reject or even refer to that adjournment request. Although the respondent relied on the statutory proviso limiting adjournments after three opportunities, administrative refusal to grant further time required the authority at least to record and reject the adjournment application before proceeding. Given the admitted voluminous transactions over three years and the explanation about the officer on medical leave, the Court held that, notwithstanding the statutory constraint on further adjournments, the petitioner ought to be afforded one more opportunity to produce records; the Court exercised its supervisory power to direct that opportunity in light of the circumstances. [Paras 9, 10, 11]Adjournment letter should have been recorded and, in the interest of justice, the petitioner is entitled to one further opportunity to produce records.Rectification under Section 161 - Principles of natural justice - Requirement of observing natural justice before passing a rectification order under Section 161 when such rectification would adversely affect the assessee. - HELD THAT: - The Court examined the provisos to Section 161 and concluded that where a rectification would adversely affect a person, the authority must follow the principles of natural justice and grant an opportunity of hearing before passing such an order. The respondent, while passing the rectification order dated 30.11.2022 and rejecting the subsequent rectification petition, did not afford personal hearing or otherwise comply with the third proviso. The petitioner had filed the rectification petition accompanied by records showing entitlement to certain ITC and discrepancies in the assessment; this demonstrated bona fides and made the requirement of hearing material. The failure to follow the proviso rendered the rectification proceedings vitiated. [Paras 12, 13, 14]Rectification order and its impugned exercise were made without observing the mandatory proviso and principles of natural justice and are set aside.Reassessment on deposit and timeline for completion - Direction for reassessment following setting aside of impugned orders and conditions imposed for protection of State revenue. - HELD THAT: - Having set aside the assessment and rectification orders for procedural defects, the Court directed a fresh decision-making process. Considering the sizeable tax liability and to balance the State's interest, the Court ordered the petitioner to deposit a specified sum for each assessment year; upon such deposit the respondent is directed to re-do the assessment, with the petitioner precluded from seeking further adjournments and permitted to submit records and raise pleas before the Assessing Officer. The Court mandated completion of the reassessment within six weeks from the date of deposit to ensure expeditious resolution. [Paras 15]Impugned orders set aside; on deposit by the petitioner the respondent shall re-do the assessment and complete it within six weeks; no further adjournments to be allowed.Final Conclusion: Writ petitions allowed: assessment order dated 10.11.2022, rectification order dated 30.11.2022 and consequential proceedings dated 01.03.2023 set aside for failure to record adjournment and for non-observance of the proviso to Section 161; petitioner granted one further opportunity and directed to make specified deposits for each year, after which the assessing authority shall re-do the assessments within six weeks. Issues involved:Challenging assessment order, rectification order, and consequential proceedings for multiple assessment years.Assessment Proceedings:- Petitioner is a manufacturer and trader of fireworks under TN GST Act, purchasing raw materials from registered dealers.- Assistant Commissioner conducted statutory audit, issued show cause notice proposing tax, penalty, and interest under TNGST Act.- Petitioner requested extensions to submit records due to medical leave of GST personnel, but orders were passed without granting sufficient time.- Petitioner filed rectification petitions under Section 161, seeking to rectify errors in assessment order.Court's Analysis:- Court noted failure of authorities to consider adjournment requests and record them in assessment order.- Recognized the need for petitioner to have additional opportunity to submit records due to voluminous transactions.- Upheld petitioner's right to file rectification petition with supporting records, granting opportunity for correction under Section 161.- Cited proviso to Section 161 requiring authorities to grant personal hearing before passing rectification order, which was not followed in this case.- Set aside impugned orders, directing petitioner to pay specified amount for each year and allowing re-assessment within six weeks upon deposit.Conclusion:Writ petitions allowed, no costs imposed, connected miscellaneous petitions closed.