2024 (5) TMI 1038 - HC - GST

Tax assessment order quashed for violating natural justice principles with non-speaking order lacking proper reasoning

The HC quashed a tax assessment order for violating natural justice principles. The adjudicating authority issued a non-speaking order that failed to ... Violation of principles of natural justice - Non-speaking order by the adjudicating authority - replies have been ignored - application of rate of tax on the commodities dealt with by the petitioner - HELD THAT:- The impugned order is wholly non-speaking both with respect to rejection of the explanation furnished by the petitioner and also with respect to application of rate of tax on the commodities dealt with by the petitioner. No discussion exists in the impugned order to consider any of the materials relied upon by the petitioner. Such approach adopted by the adjudicating authority is unacceptable. Once explanation was furnished to the show cause notice, irrespective of its worthiness in the eyes of the adjudicating authority, it remained obligated in law to deal with the same by affording adequate reasons. Merely describing a claim as unacceptable or false or rejected would not fulfill the requirements of a proper adjudication proceeding. The reason to reach such conclusion is the essence of fairness of an adjudication proceeding. Unless such reasons are given in black and white, the adjudication order may remain laconic. Second, assuming for the sake of submission that the adjudicating authority had chosen to reject the explanation submitted by the petitioner and such rejection may have been valid, another fatal error has been committed in the adjudication proceedings, insofar as no reason had been assigned by the adjudicating authority in taxing the turn over on best judgement basis - the adjudicating authority has not assigned any reason to submit such turnover at the highest rate of tax i.e. @ 28%. In doing that he has acted unmindful of the fact that it was the further claim of the petitioner arising from the same books of accounts and that part of turnover was exempt. In the present case, the petitioner was not at fault for the delay in the proceedings. The notice was issued late. The petitioner responded in writing and submitted his application. That has been rejected without assigning any reasons. The adjudication order is clearly laconic - even if the petitioner was relegated to the forum of the appeal, irrespective of the fate in that appeal, the petitioner may never have any opportunity before the adjudicating authority. Therefore, that layer of the proceeding would remain practically ex-parte against the petitioner to the extent his replies would remain from being considered by the adjudicating authority. The matter is remitted to the adjudicating authority to pass a fresh reasoned order as expeditiously as possible preferably within a period of three months after hearing the petitioner - The writ petition is allowed by way of remand. Issues Involved:1. Non-speaking order by the adjudicating authority.2. Arbitrary application of tax rate.3. Violation of principles of natural justice.Summary:Non-speaking Order by the Adjudicating Authority:The petitioner challenged the order dated 31.12.2023 passed by the adjudicating authority u/s 73 of the U.P.G.S.T. Act, 2017, for the period 1.7.2017 to 31.3.2018. The petitioner received a show cause notice dated 30.9.2023 and submitted replies on 23.12.2023 and 31.12.2023, including copies of his ledger, balance sheet, and books of accounts. However, the adjudicating authority ignored these replies and concluded that the explanation furnished was not worthy of acceptance without providing any reasoning. The court noted that the impugned order is wholly non-speaking with respect to the rejection of the explanation furnished by the petitioner and the application of the tax rate on the commodities dealt with by the petitioner.Arbitrary Application of Tax Rate:The adjudicating authority subjected the entire turnover to tax @ 28% without discussing the nature and identity of the commodities or considering the rate of tax specified under the Schedule to the Act. The petitioner dealt with two types of commodities: taxable (Pulses) and exempt (Paddy and Paddy husk). The turnover of both commodities was disclosed in the monthly returns and the documents submitted with the replies. The adjudicating authority failed to provide any reason for taxing the turnover at the highest rate of 28%, despite accepting the disclosure made by the petitioner on Form GSTR-3B.Violation of Principles of Natural Justice:The court emphasized that the adjudicating authority is obligated to deal with the explanation furnished by the petitioner by providing adequate reasons. Merely describing a claim as unacceptable or false does not fulfill the requirements of a proper adjudication proceeding. The court highlighted that the essence of fairness in an adjudication proceeding requires reasons to be given in black and white. The adjudicating authority's failure to assign reasons for taxing the turnover on a best judgment basis and ignoring the petitioner's explanation violates the principles of natural justice.Conclusion:The court set aside the adjudication order dated 31.12.2023, noting that it is laconic and violates the principles of natural justice. The matter is remitted to the adjudicating authority to pass a fresh reasoned order as expeditiously as possible, preferably within three months, after hearing the petitioner.