2025 (3) TMI 550 - HC - GST

Jharkhand HC quashes section 74 GST adjudication orders for denying personal hearing opportunities to petitioners

Limra Traders Versus The State of Jharkhand, The Additional Commissioner of State Tax, (Administration), Jamshedpur Division, Jamshedpur, The Deputy Commissioner of State Tax, Bureau of Investigation, Jamshedpur Division, Jamshedpur, The Joint Commissioner of State Tax, Singhbhum Circle, Jamshedpur, The Assistant Commissioner of State Tax, State Tax, Singhbhum, A.S. Enterprises, M/s. Vansh Enterprises.

Jharkhand HC quashed adjudication orders passed under section 74 of the Jharkhand Goods and Services Tax Act, 2017 for violating principles of natural ... Seeking quashing of the adjudication order including summary of demand passed by adjudicating authority - adjudication orders passed u/s 74 of the Jharkhand Goods and Services Tax Act, 2017 without granting any opportunity of personal hearing to the petitioner - violation of principls of natural justice - HELD THAT:- It appears that State Tax authorities are continuing to conduct adjudication proceedings in utter disregard to the mandatory provisions of the Act and in violation of the principles of natural justice. Due to procedure being not followed by State Tax authorities in conduct of adjudication proceedings, huge revenue of the State is otherwise lost which could have been protected, if due procedure is followed while passing adjudication orders. This Court in the case of M/s. Godavari Commodities Limited [2022 (4) TMI 1026 - JHARKHAND HIGH COURT] have already issued directions in the year 2022 itself directing Commissioner of State Tax Department to issue appropriate guidelines/circular/notification elaborating therein the procedure which is to be adopted by State Tax authorities regarding the manner of issuance of show cause notice, adjudication and recovery proceedings, so that proper procedure is followed by State Tax authorities in conduct of the adjudication proceedings. It appears that the aforesaid directions passed by this Court have not been complied with. Conclusion - The adjudication orders were invalid due to procedural violations and quashed them. It is deemed appropriate to allow both these writ applications by imposing cost as adjudication orders have been passed blatantly ignoring the statutory provisions. Accordingly, both these writ petitions are allowed and the impugned adjudication order including summary of order dated 05.06.2024 and impugned adjudication order including summary of order dated 10.07.2024w.r.t. both these petitions, passed by the 5th Respondent, is hereby, quashed and set aside - Petition allowed by way of remand. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were:Whether the adjudication orders passed under Section 74 of the Jharkhand Goods and Services Tax Act, 2017 (JGST Act, 2017) were in violation of the principles of natural justice due to the lack of an opportunity for personal hearing.Whether the adjudication proceedings complied with the procedural requirements set out in Sections 75(4) and 75(5) of the JGST Act, 2017.Whether the State Tax authorities adhered to the guidelines and directions previously issued by the Court in similar cases, specifically in the case of M/s. Godavari Commodities Limited.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The relevant legal framework involves Sections 74 and 75 of the JGST Act, 2017. Section 74 deals with the determination of tax not paid or short paid, while Section 75 outlines the general provisions relating to the determination of tax, specifically emphasizing the need for an opportunity of hearing and the possibility of adjournment if sufficient cause is shown.The Court referenced its previous decision in M/s. Godavari Commodities Limited, which emphasized the necessity of providing a sufficient opportunity for personal hearing before passing adjudication orders.Court's interpretation and reasoning:The Court interpreted Sections 75(4) and 75(5) as mandating an opportunity for a personal hearing when an adverse decision is contemplated. It also highlighted that adjournments could be granted for sufficient cause, but not more than three times during proceedings. The Court found that the adjudication orders were passed in violation of these provisions, as the orders were issued ex-parte on the first date of compliance without a proper hearing.Key evidence and findings:The evidence included the order-sheets and adjudication orders, which demonstrated that the orders were passed on the first date of compliance, without any proceedings being held on the scheduled dates. This was contrary to the principles of natural justice and the statutory provisions requiring a hearing.Application of law to facts:The Court applied the statutory provisions and its previous rulings to the facts, concluding that the adjudication orders were passed without adhering to the mandatory procedural requirements. The lack of a personal hearing and the ex-parte nature of the orders were clear violations of the principles of natural justice.Treatment of competing arguments:The State argued that sufficient compliance with the principles of natural justice was achieved through prior inspections and summonses. However, the Court found these arguments unconvincing, as the adjudication orders were still passed without the required opportunity for a hearing.Conclusions:The Court concluded that the adjudication orders were passed in violation of the principles of natural justice and the statutory provisions of the JGST Act, 2017. The orders were quashed, and the State was directed to pay costs to the petitioner.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:The Court reiterated the importance of Sections 75(4) and 75(5), stating: 'Opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.'Core principles established:The necessity of providing a sufficient opportunity for personal hearing in tax adjudication proceedings.The requirement for State Tax authorities to adhere to procedural guidelines and statutory provisions to ensure fair adjudication.Final determinations on each issue:The Court determined that the adjudication orders were invalid due to procedural violations and quashed them. It imposed costs on the State and allowed for the possibility of fresh proceedings in accordance with the law.