2024 (1) TMI 570 - HC - GST

GST Section 74 notice quashed due to improper service violating natural justice principles

The Allahabad HC quashed orders dated September 14, 2021 and October 5, 2023 for violating principles of natural justice. The petitioner had voluntarily ... Violation of principles of natural justice (audi alterem partem) - cancellation of registration voluntarily on September 18, 2019, whereas the notice under Section 74 of the Act was given to it only by way of uploading the same on the web portal on a subsequent date - HELD THAT:- It is trite law that principles of audi alteram partem are required to be followed by the authority and giving a go by to the same results in violation of the principles of natural justice. One may examine the development of the law in relation to natural justice. The Division Bench of this Court in SR COLD STORAGE VERSUS UNION OF INDIA AND 3 OTHERS [2022 (8) TMI 806 - ALLAHABAD HIGH COURT] held Natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience, to be ranked as fundamental. The purpose of following the principles of natural justice is the prevention of miscarriage of justice. The Supreme Court, in the celebrated constitutional judgment in MANEKA GANDHI VERSUS UNION OF INDIA [1978 (1) TMI 161 - SUPREME COURT], while dealing with a challenge laid to an order by which a passport was impounded, expounded upon the significance of the principles of audi alteram partem to the doctrine of natural justice. The Supreme Court in M/S. DHARAMPAL SATYAPAL LTD. VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE, GAUHATI & OTHERS [2015 (5) TMI 500 - SUPREME COURT] outlined the fundamental importance of providing an opportunity for hearing before making any decision, and characterized it as a basic requirement in any legal proceedings. The Supreme Court further propounded that compliance with principles of natural justice is an implied mandatory requirement, and non-observance of these principles can invalidate the exercise of power. In the present case, when the petitioner had cancelled its registration in the year 2019, a proper notice was required to be issued to it under Section 74 of the Act at its address. However, the authorities simply uploaded the Section 74 show cause notice on the web portal inspite of knowing that the petitioner had already cancelled its registration prior to the date of issuance of the show cause notice. This action clearly prevented the petitioner from appearing in the hearing in the original proceeding under Section 74 of the Act that was accordingly passed ex parte - any action that proceeds without proper intimation and service of the show cause notice to the petitioner is vitiated and bad in law, and is, accordingly required to be quashed and set aside. The impugned orders dated September 14, 2021 and October 5, 2023 are quashed and set aside with a direction upon respondent No.3 to grant an opportunity of hearing to the petitioner on January 30, 2024 at 11.00 AM, and after hearing the petitioner, pass a reasoned order within two weeks from the date of hearing. It is expected that no unnecessary adjournments shall be granted by the authority concerned. The writ petition is allowed. Issues Involved:1. Legality of notice issuance under Section 74 of the Central Goods and Services Tax Act, 2017 after the petitioner had cancelled its registration.2. Violation of principles of natural justice, specifically audi alteram partem, due to non-provision of Special Investigation Branch (SIB) report and lack of a second hearing opportunity.Summary:Issue 1: Legality of Notice Issuance Post-Registration CancellationThe petitioner argued that their registration was voluntarily cancelled on September 18, 2019, and the notice under Section 74 of the Act was uploaded on the web portal only in 2021 or late December 2020. The petitioner contended that since the registration was cancelled, there was no obligation to check the web portal for such notices. The court noted that proper notice was required to be issued at the petitioner's address, and merely uploading the notice on the web portal was insufficient, especially when the authorities were aware of the prior cancellation of registration. This action prevented the petitioner from appearing in the original proceedings, rendering the ex parte order under Section 74 invalid.Issue 2: Violation of Principles of Natural JusticeThe petitioner also contended that the respondent proceeded based on the SIB report without providing a copy to the petitioner, and the appellate authority did not grant a second hearing opportunity. The court emphasized the importance of the principles of audi alteram partem, citing various precedents that highlight the necessity of a fair hearing and the opportunity to present one's case. The court reiterated that natural justice requires that any material relied upon by authorities, such as the SIB report, must be disclosed to the assessee to enable them to rebut the same. The failure to provide this information and the lack of a second hearing opportunity constituted a violation of natural justice principles, rendering the proceedings and subsequent orders invalid.Conclusion and DirectionsThe court quashed the impugned orders dated September 14, 2021, and October 5, 2023, directing respondent No.3 to grant an opportunity of hearing to the petitioner on January 30, 2024, at 11.00 AM, and to pass a reasoned order within two weeks from the hearing date. Additionally, the court mandated that the SIB report be provided to the petitioner within a week.Final OrderThe writ petition was allowed with the above directions.