2024 (8) TMI 1312 - HC - GST

Tax Assessment Voided Due to Improper Notice Delivery, Petitioner Granted Opportunity to Respond and Challenge Disputed Tax

HC found procedural irregularities in tax assessment proceedings. Despite email notices, physical notices were undelivered. The court set aside the tax ... Violation of principles of natural justice - service of notice by registered E-Mail - effect of cancellation of registration on notice receipt - remand for fresh adjudication - pre-condition of deposit for filing objectionsViolation of principles of natural justice - service of notice by registered E-Mail - Whether the impugned assessment order suffers from violation of principles of natural justice for want of valid service of statutory notices - HELD THAT: - The Court recognised that show cause and subsequent notices were sent both physically and to the taxpayer's registered E Mail ID. Physical notices were returned with the postal notation 'Left'. Although notices were sent to and received in the registered E Mail ID, the registration had been cancelled earlier on the ground of non filing of returns and proceedings leading to the impugned order commenced only after cancellation. The Court held that cancellation of registration could reasonably have resulted in the taxpayer not monitoring the registered E Mail account, creating an ambiguity as to whether the taxpayer had actual notice of the proceedings. In view of that ambiguity and the constitutional requirement of fair opportunity, the Court found that adjudication should not be allowed to stand without giving the taxpayer an opportunity to be heard.Impugned order set aside and matter remanded for fresh adjudication to cure the lapse in the observance of principles of natural justice.Remand for fresh adjudication - Nature and scope of the remand and procedural directions to effect fresh adjudication - HELD THAT: - The Court directed that the show cause notice dated 22.04.2022 and the impugned order dated 21.12.2022 be treated as notices of the pending assessment and granted the petitioner three weeks to file a response. The 3rd respondent was directed to afford a personal hearing to the petitioner on the specified date thereafter. If additional time is sought by the petitioner, it must be sought by providing an E Mail ID and an address for service to ensure effective communication. The remand is for fresh adjudication on merits after affording the taxpayer notice and opportunity to be heard.Remanded to the 3rd respondent for fresh adjudication; procedural timetable and conditions for representation prescribed.Pre-condition of deposit for filing objections - Whether the petitioner must comply with any pre-condition before being permitted to file objections on remand - HELD THAT: - Having noted the belated approach to the Court, the Court imposed a limited protective measure as a pre condition to balance the revenue's interest with the taxpayer's right to be heard. The Court required the petitioner to pay 10% of the disputed tax as a pre condition to being permitted to file objections before the assessing authority. No costs were awarded between the parties.Petitioner permitted to file objections subject to payment of 10% of the disputed tax as a pre condition.Final Conclusion: Writ petition allowed; the assessment order dated 21.12.2022 is set aside and remitted to the assessing authority for de novo adjudication after giving the petitioner three weeks to file responses and a personal hearing, subject to the petitioner depositing 10% of the disputed tax as a pre condition. Issues:Violation of principles of natural justice in tax assessment proceedings.Analysis:The petitioner, a registered dealer under the CGST Act, had their registration cancelled, leading to tax assessment for the period from October 2017 to March 2019. Despite notices sent via email, physical notices for personal hearing were returned, indicating lack of response. The tax authority proceeded with assessment and confirmed a demand of Rs. 46,77,312. The petitioner challenged the order, alleging violation of natural justice due to non-receipt of physical notices.The court considered the contention of non-receipt of physical notices by the petitioner and the argument that notices sent to the registered email were sufficient. The cancellation of registration and returned physical notices should have prompted the tax authority to ensure proper service. The court noted the ambiguity and granted the petitioner an opportunity to present their case. The impugned order was set aside, and the matter was remanded for adjudication by the tax authority.The court deemed the present proceedings as notice to the petitioner, allowing them three weeks to respond to the show cause notices. A personal hearing was scheduled, with provisions for seeking additional time if needed. The petitioner was required to pay 10% of the disputed tax before filing objections due to the belated approach to the court. No costs were awarded, and pending interlocutory applications were closed as a result of the judgment.