Managing partner's critical illness during show-cause notice period justifies quashing GST order under section 73(9) for violating natural justice principles

Gujarat HC allowed petition challenging order under section 73(9) of CGST Act, 2017. Petitioner-firm's managing partner was critically ill with cancer during February-August 2022, affecting ability to respond to show-cause notice dated 22.02.2022. Despite firm continuing to file returns through consultant, HC found department should have granted additional hearing opportunity given managing partner's illness. Court held principles of natural justice required fair chance of hearing before passing adverse order dated 04.04.2022. HC quashed impugned order and appellate order dated 04.09.2022, remanding matter back to department for fresh consideration after providing hearing opportunity to petitioner.

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Issues:
Petition under Article 227 to quash orders under CGST Act, discrepancy in input tax credit, appeal dismissal on limitation grounds, violation of natural justice in passing orders.

Analysis:
The petitioner filed a petition under Article 227 seeking to quash an order passed under section 73(9) of the Central Goods and Service Tax Act, 2017 (CGST Act) and an order dismissing their appeal on limitation grounds. The petitioner, engaged in Real Estate Construction and Development, received a notice for discrepancies in their returns related to high utilization of input tax credit. Despite the petitioner's response, a show-cause notice was issued demanding payment. The petitioner cited the managing partner's illness as the reason for not replying timely. The respondent passed an order determining liability, and the appellate authority rejected the appeal due to limitation. The petitioner argued that the illness prevented them from replying and that the orders violated natural justice.

The respondent contended that the petitioner was aware of the notice based on return filings and should have replied, emphasizing the partnership structure of the firm. The Court noted the managing partner's critical illness and the return filings but highlighted the requirement of granting an opportunity of hearing under section 75(4) of the CGST Act before passing adverse orders. The Court opined that despite the failure to reply, considering the managing partner's health, the respondent should have provided an opportunity for a fair hearing. Consequently, the impugned orders were quashed, and the matter was remanded for a fresh decision with an opportunity for the petitioner to be heard, emphasizing compliance with the principles of natural justice. The Court directed the respondent to decide the show-cause notice within twelve weeks.

In conclusion, the Court's decision focused on upholding principles of natural justice, especially in cases where a party's inability to respond promptly is due to valid reasons such as illness. The judgment emphasized the importance of providing a fair chance for the petitioner to comply with procedural requirements and have their case heard before adverse orders are passed.

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