2024 (7) TMI 360 - HC - GST

Tax Demand Notice Invalidated: Procedural Flaws Expose Need for Fair Hearing and Proper Review Process

HC found procedural irregularities in tax demand notice. The court set aside the original order, directing tax authorities to provide reasonable ... Right to be heard - natural justice - opportunity of personal hearing - confirmation of tax demand without hearing - remand for fresh consideration on payment of a proportionate amountConfirmation of tax demand without hearing - right to be heard - The tax demand confirmed on account of discrepancies in Input Tax Credit was set aside because it was confirmed without affording the petitioner a hearing. - HELD THAT: - The Court found that the impugned order confirmed the tax demand arising from comparison of the petitioner's GSTR 3B with auto-populated GSTR 2B without hearing the petitioner. The absence of an opportunity to be heard rendered the confirmation unsustainable. In view of the petitioner having proffered explanations earlier and the respondent having conceded that opportunities had been afforded in the proceedings, the court concluded that fairness required setting aside the order and directing reconsideration after affording a hearing. [Paras 5]Impugned order set aside for want of hearing; petitioner entitled to opportunity before finalization of demand.Remand for fresh consideration on payment of a proportionate amount - opportunity of personal hearing - The matter was remanded to the respondent for fresh consideration on the condition that the petitioner remit 10% of the disputed tax demand and is permitted to file a reply, and the respondent shall provide a reasonable opportunity including personal hearing and pass a fresh order within a stipulated period. - HELD THAT: - The petitioner offered to remit 10% of the disputed demand as a condition for remand and sought opportunity to respond to the show cause notice. The Court exercised its supervisory jurisdiction to set aside the order on condition that the petitioner deposits 10% of the disputed tax demand within two weeks and files his reply within the same period. Upon receipt of the deposit and reply, the respondent is directed to grant a reasonable opportunity of hearing, including personal hearing, and thereafter pass a fresh order within two months from receipt of the petitioner's reply. The directions ensure compliance with natural justice while permitting the assessing authority to adjudicate on merits. [Paras 6]Proceedings remitted to respondent on specified conditions; respondent to grant hearing and pass fresh order within two months after receipt of petitioner's reply and payment.Final Conclusion: Writ petition disposed of by setting aside the impugned order for lack of hearing and remitting the matter to the assessing authority on the condition that the petitioner deposits 10% of the disputed demand and files a reply within two weeks; authority to grant a personal hearing and pass a fresh order within two months; no order as to costs. Issues:Challenge to an order on the ground of lack of reasonable opportunity.Analysis:The petitioner, engaged in the business of supplying water purifiers and R.O. systems, received a notice regarding discrepancies in returns. The petitioner claims they were unable to respond to the intimation or show cause notice as it was uploaded on the GST portal without being served through any other mode. The petitioner's counsel argues that detailed explanations were provided upon receiving the notice and is willing to remit 10% of the disputed tax demand.The Government Advocate representing the respondent acknowledges receipt of notice and argues that the petitioner had multiple opportunities to contest the tax demand. The confirmed tax demand pertains to discrepancies in Input Tax Credit claimed by the petitioner, confirmed without a hearing. The petitioner agrees to pay 10% of the disputed tax demand for remand, leading the court to set aside the impugned order on the condition of remitting the agreed amount within two weeks.The court directs the petitioner to submit a reply to the show cause notice within the given period. Upon satisfaction of receiving the remittance and the petitioner's reply, the respondent is instructed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within two months. The writ petition is disposed of without any costs, and connected miscellaneous petitions are closed.