2024 (7) TMI 368 - HC - GST

GST Order Overturned: Natural Justice Violation Leads to Procedural Reset with Partial Tax Deposit Requirement

HC allowed writ petition challenging GST order due to breach of natural justice. Court set aside original order, directing petitioner to deposit 10% of ... Breach of principles of natural justice - opportunity of personal hearing - remand for fresh disposal on compliance with pre-deposit - pre-deposit by cash not from electronic credit ledgerBreach of principles of natural justice - opportunity of personal hearing - remand for fresh disposal on compliance with pre-deposit - pre-deposit by cash not from electronic credit ledger - Impugned order confirming tax proposal for failure to reply was set aside and matter remanded on conditions because the petitioner alleged unawareness of proceedings. - HELD THAT: - The Court found that the impugned order dated 22.06.2023 was passed because the petitioner did not file a reply. The petitioner asserted non-participation on the ground that show cause notice and other communications were uploaded only on the GST portal and not otherwise communicated, raising a claim of breach of principles of natural justice. In the interest of justice the Court granted the petitioner an opportunity to be heard but placed the petitioner on terms. The order was set aside subject to the petitioner remitting 10% of the disputed tax demand in cash within two weeks from receipt of a copy of the order. During that period the petitioner is permitted to submit a reply to the show cause notice. On receipt of the reply and upon satisfaction that the 10% cash amount has been received, the respondent shall provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter pass a fresh order within three months from receipt of the petitioner's reply. The Court recorded the respondent's contention that earlier payments had been made from the electronic credit ledger which cannot be used for pre-deposit, and accordingly the remand condition requires cash payment.Impugned order set aside and matter remanded for fresh disposal on the petitioner remitting 10% of the disputed tax demand in cash within two weeks, filing a reply within that period, and thereafter being afforded a personal hearing with a fresh order to follow within three months.Final Conclusion: Writ petition allowed on terms: impugned order quashed and matter remanded for fresh consideration subject to the petitioner making a 10% cash pre-deposit within two weeks, filing a reply, and being given a personal hearing; fresh order to be passed within three months thereafter. Issues involved:Challenge based on breach of principles of natural justice in an order regarding denial of Input Tax Credit under GST enactments.Analysis:1. The petitioner challenged an order dated 22.06.2023, alleging a breach of natural justice principles due to lack of communication regarding the proceedings leading to the order. The petitioner claimed unawareness as the show cause notice and other communications were uploaded on the GST portal but not communicated through any other mode. This formed the basis of the writ petition filed.2. The tax proposal in question involved the denial of Input Tax Credit concerning a purchase made by the petitioner under sub-section (5) of Section 17 of relevant GST enactments. The petitioner had made specific payments towards SGST and CGST, and the counsel agreed, without prejudice, to remit 10% of the disputed tax demand in cash as a condition for remand.3. The Additional Government Pleader for the respondent pointed out that the earlier payments by the petitioner were debited from the electronic credit ledger, which could not be considered for pre-deposit purposes.4. Upon scrutiny of the impugned order, it was noted that the tax proposal was confirmed due to the petitioner's failure to respond. Given the petitioner's claim of being unaware of the proceedings, the court deemed it necessary in the interest of justice to provide an opportunity to the petitioner, albeit subject to certain conditions.5. The court set aside the impugned order on the condition that the petitioner remit 10% of the disputed tax demand in cash within two weeks from receiving a copy of the order. The petitioner was also allowed to submit a reply to the show cause notice within this period. Once the respondent verified the receipt of the 10% payment, they were directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh order within three months from receiving the petitioner's reply.6. The writ petition was disposed of based on the above terms, with no costs imposed. Subsequently, related miscellaneous petitions were closed as well.