2024 (6) TMI 1153 - HC - GST

Tax Order Overturned: Procedural Flaws Require Fresh Hearing with Opportunity for Petitioner's Detailed Response

The HC found procedural irregularities in a tax order, directing the respondent to treat the original order as a show cause notice. The petitioner was ... Violation of principles of natural justice - SCN and impugned order were uploaded on the “View Additional Notices and Orders” tab on the GST portal and not communicated to the petitioner through any other mode - mismatch between the GSTR 3B returns and GSTR 2A - HELD THAT:- On perusal of the impugned order, it is evident that the tax proposal was confirmed because the petitioner did not respond to the show cause notice or attend the personal hearing. The petitioner has placed on record proof that the petitioner's electronic credit ledger was debited to the extent of Rs. 90,000/-. Since learned Additional Government Pleader does not have instructions in this regard, the respondent may verify whether such payment was towards the tax liability under the impugned order. Subject to such verification, the interest of justice warrants that an opportunity be provided to the petitioner. The petition is disposed of by directing that the impugned order dated 31.08.2023 be treated as a show cause notice. The petitioner is permitted to submit a reply in respect thereof within a period of two weeks from the date of receipt of a copy of this order. Issues: Challenge of order on breach of natural justiceThe petitioner challenges an order dated 31.08.2023 on the grounds of breach of principles of natural justice, stating that he was unaware of the proceedings leading to the order as the intimation, show cause notice, and impugned order were uploaded on the GST portal without any other communication. The petitioner argues that the show cause notice lacked details regarding the tax proposal, and that he had paid Rs. 90,000 towards the tax liability, which is more than 10% of the disputed tax demand. The petitioner seeks another opportunity to explain the discrepancies between GSTR 3B returns and GSTR 2A.Analysis:The petitioner contends that the order in question was issued without proper communication, depriving him of the opportunity to respond adequately. The lack of specific details in the show cause notice raises concerns about procedural fairness and the petitioner's right to be heard. The petitioner's assertion of having paid a significant amount towards the tax liability underscores the need for a thorough review of the circumstances leading to the impugned order. The court acknowledges the importance of natural justice and directs that the impugned order be treated as a show cause notice, allowing the petitioner to submit a reply within two weeks. This step aims to rectify the procedural shortcomings and ensure the petitioner's right to present his case effectively.Issues: Respondent's lack of instructions regarding petitioner's paymentThe learned Additional Government Pleader representing the respondent accepts notice but indicates a lack of instructions regarding the petitioner's payment of Rs. 90,000 after the issuance of the impugned order. The respondent is directed to verify whether the payment was made towards the tax liability under the impugned order to ensure clarity on the financial aspect of the case.Analysis:The respondent's lack of instructions regarding the petitioner's payment raises questions about the proper handling of financial transactions related to the tax liability. The court emphasizes the need for verification to ascertain the purpose of the payment and its relation to the impugned order. This verification process is crucial for ensuring transparency and accuracy in determining the petitioner's financial obligations and addressing any discrepancies that may have arisen during the proceedings.Outcome: Opportunity for petitioner and directions to respondentIn light of the procedural irregularities and financial uncertainties, the court disposes of the writ petition by directing that the impugned order be treated as a show cause notice. The petitioner is granted an opportunity to submit a reply within two weeks and provide explanations for the discrepancies in tax returns. Upon verification of the petitioner's payment, the respondent is instructed to afford a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh order within three months. The court emphasizes the need for clarity on the payment made by the petitioner and outlines the steps for reconsideration based on the verified information. The disposition of the petition without costs signifies the court's focus on procedural fairness and the equitable resolution of the dispute.