Tax Demand Invalidated: Procedural Errors Require Fresh Notice, Hearing, and Partial Payment of Disputed Tax

HC found the tax demand procedurally flawed due to delayed notice and lack of reasonable opportunity to contest. The court set aside the original order, directing the petitioner to pay 5% of disputed tax and submit a reply. Respondent must provide a personal hearing and issue a fresh order within three months, ensuring principles of natural justice are followed.

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Issues:
Challenge to tax demand due to lack of reasonable opportunity for contesting, non-utilization of available credit, compliance with principles of natural justice.

Analysis:
The petitioner challenged an order dated 20.12.2023, claiming they were not given a fair chance to contest the tax demand due to the cancellation of their GST registration in 2018. The petitioner argued that since the show cause notice was uploaded five years after the registration cancellation, they were unable to participate in the proceedings. The petitioner's counsel highlighted that there was available credit in the electronic credit ledger, which, if considered, would eliminate discrepancies in returns. The petitioner agreed to pay 5% of the disputed tax demand for reconsideration.

The Government Advocate for the respondent contended that the petitioner had a duty to monitor the portal even after registration cancellation for proceedings related to their business period. It was argued that principles of natural justice were adhered to in the proceedings. The court noted the cancellation order effective from 31.08.2018 and found that the tax proposal was confirmed due to the petitioner's non-appearance for the hearing or response to the notice. The court also observed the available credit in the petitioner's ledger, indicating the need for reconsideration.

Consequently, the court set aside the impugned order on the condition that the petitioner pays 5% of the disputed tax demand within fifteen days and submits a reply to the show cause notice within that period. Upon receiving the reply and the payment, the respondent was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh order within three months. The case was disposed of with no costs, and related motions were closed.

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