Tax Authority Must Provide Fair Hearing and Personal Opportunity to Taxpayer Before Finalizing Demand Order Under Principles of Natural Justice

SC found a breach of natural justice in tax demand proceedings. The court set aside the original order, directing the tax authority to provide a personal hearing and issue a fresh order. The petitioner must remit 10% of the disputed tax demand and submit a reply to the show cause notice within the specified timeframe. No costs were imposed, and the writ petition was disposed of with procedural guidelines.

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Issues:
Breach of principles of natural justice in tax demand contestation.

Analysis:
The judgment pertains to a writ petition challenging an order in original dated 22.12.2023 on grounds of breach of principles of natural justice. The petitioner claimed inability to contest the tax demand due to lack of information from their consultant. The petitioner had opted for the composition scheme and filed returns in Form GSTR 4 quarterly. The confirmed tax proposal was deemed unsustainable as it related to a mismatch between outward and inward supply. The petitioner agreed to remit 10% of the disputed tax demand as a condition for remand. The Government Advocate contended that principles of natural justice were followed through notices issued. The impugned order confirmed the tax proposal due to the petitioner's non-reply to the show cause notice, focusing on the comparison between inward and outward supply. The court, considering the evidence of composition levy and quarterly returns, set aside the order on the condition of remitting 10% of the disputed tax demand within two weeks and submitting a reply to the show cause notice. The respondent was directed to provide a reasonable opportunity for a personal hearing and issue a fresh order within three months from receiving the petitioner's reply. The writ petition was disposed of with no costs, and related motions were closed.

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