2025 (3) TMI 664 - HC - GST

Tax Orders Annulled for Violating Natural Justice; Case Remanded with 10% Deposit Condition; Bank Account Attachment Lifted

The HC found that tax orders issued under the Tamil Nadu and Central Goods and Services Tax Acts violated principles of natural justice due to inadequate ... Challenge to order passed first respondent under Section 161 of the Tamil Nadu Goods and Service Tax Act, 2017 /Central Goods and Service Tax Act, 2017 - Service of notice - principles of natural justice - HELD THAT:- On perusal of records, it is crystal clear that the impugned orders came to be passed against the petitioner, behind their back, as the respondent-Department has not taken any steps to serve any notices/communications, which culminated in the impugned orders directly through physical mode of service and made it available only in the GST Portal under the ''View of additional notices and orders' column, which, the petitioner was not aware and ultimately, the impugned orders came to be passed against the petitioner without even affording any opportunity of hearing to the petitioner, which is in total violation of principles of natural justice. Therefore, this Court is of the view that the impugned orders are nothing but an ex parte orders and the same have to be set aside. The orders are set aside - the matters are remanded back to the first respondent for fresh consideration. Petition allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment relate to the procedural fairness in the issuance of tax orders under the Tamil Nadu Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017. Specifically, the issues include:Whether the orders passed by the first respondent under Sections 161 and 73 of the respective Acts were issued in violation of the principles of natural justice due to a lack of proper notice and opportunity for the petitioner to respond.Whether the attachment of the petitioner's bank account was justified without affording an opportunity for a hearing.What remedial actions are appropriate if the orders are found to be procedurally flawedRs.ISSUE-WISE DETAILED ANALYSIS1. Procedural Fairness and Principles of Natural JusticeRelevant legal framework and precedents: The principles of natural justice require that parties affected by a decision should have the opportunity to present their case. Under the Tamil Nadu Goods and Services Tax Act, 2017, and the Central Goods and Services Tax Act, 2017, proper notice and the opportunity for a hearing are fundamental before any adverse order is passed.Court's interpretation and reasoning: The Court found that the orders were passed ex parte, as the petitioner was not given any direct notice or opportunity to respond. The notices were only uploaded on the GST portal, which the petitioner was unaware of, leading to a violation of natural justice principles.Key evidence and findings: The Court noted that the respondent-Department did not serve notices through physical means and relied solely on the GST portal for communication, which the petitioner did not access. This lack of direct communication resulted in the petitioner being unaware of the proceedings against them.Application of law to facts: The Court applied the principles of natural justice, emphasizing the need for proper notice and the opportunity to be heard, which were not provided in this case. The reliance on portal uploads without additional notice was deemed insufficient.Treatment of competing arguments: The respondent's acknowledgment that the petitioner could deposit 10% of the disputed tax for reconsideration indicated an acceptance of procedural shortcomings. The Court balanced this by setting aside the orders while imposing a condition for the deposit.Conclusions: The Court concluded that the orders were procedurally flawed due to the absence of adequate notice and hearing, warranting their annulment and remand for fresh consideration.2. Attachment of Bank AccountRelevant legal framework and precedents: The attachment of bank accounts under tax laws typically requires adherence to due process, including prior notice and an opportunity to contest the action.Court's interpretation and reasoning: The Court recognized the hardship caused by the attachment of the petitioner's bank account, particularly as it affected the petitioner's ability to pay employee salaries.Key evidence and findings: The attachment was based on the impugned orders, which were set aside due to procedural defects. The Court found that the attachment was unjustified without a proper hearing.Application of law to facts: The Court applied the principles of fairness and due process, determining that the attachment should be lifted upon compliance with the condition of depositing 10% of the disputed tax.Treatment of competing arguments: The respondent's concession regarding the deposit facilitated a resolution that balanced the interests of both parties, allowing for the bank account's operational restoration.Conclusions: The attachment was deemed improper due to the procedural flaws in the underlying orders, and the Court ordered its lifting subject to the petitioner's compliance with the deposit condition.SIGNIFICANT HOLDINGSThe Court held that the impugned orders were issued in violation of the principles of natural justice due to the lack of proper notice and opportunity for a hearing. The orders were set aside, and the matters were remanded for fresh consideration. The Court emphasized the necessity of direct communication and opportunity for personal hearing before passing adverse orders.Core principles established:The requirement for direct and adequate notice to affected parties in tax proceedings.The necessity of providing an opportunity for a personal hearing before issuing adverse tax orders.The procedural fairness in the attachment of bank accounts, ensuring due process is followed.Final determinations on each issue:The orders passed under Sections 161 and 73 were set aside due to procedural deficiencies.The matters were remanded for fresh consideration, with the condition that the petitioner deposits 10% of the disputed tax.The attachment of the petitioner's bank account was ordered to be lifted upon compliance with the deposit condition, allowing the petitioner to resume normal operations.