2025 (4) TMI 628 - HC - GST

GST Assessment Order Invalidated: Procedural Errors Breach Natural Justice, Requiring Fresh Notice and Reconsideration Under Section 46

M/s Xestion Advisor Private Limited Versus Additional Commissioner Grade II and Another

HC invalidated assessment order under GST Act due to procedural irregularities. The court found that a section 46 notice was issued after the assessment ... Validity of assessment order dated 21.09.2020, passed under section 62 of the GST Act - non-issuance of a notice under section 46 of the GST Act prior to the assessment order - violation of principles of natural justice - HELD THAT:- The record reveals that admittedly, an order dated 21.09.2020 was passed under section 62 of the GST Act creating demand against the petitioner to the tune of Rs. 19,80,000/-, but the notice under section 46 of the GST Act was issued on 25.09.2020, much after the passing of the order dated 21.09.2020. The record clearly shows that the assessment order under section 62 of the GST Act suffers from serious lacuna due to non-issuance of notice under section 46 of the GST Act. Even the appellate court has failed to taken note of the said fact. Therefore, the impugned orders suffer from serious infirmity for non-compliance of principles of natural justice and procedural requirement prescribed under the Statute in absence of proper service on the petitioner. On an identical set of fact, the High Court of Jharkhand, in Vinman Constructions Limited Vs. State of Jharkhand [2022 (3) TMI 88 - JHARKHAND HIGH COURT], has held that 'The impugned action has led to serious penal consequences which cannot be sustained in view of serious infirmities in the procedure adopted by the Assessing Officer. This Court is, therefore, of the view that the impugned assessment order dated 02.08.2018 passed by the Respondent No. 2 (Annexure-6)as also the Summary of the Order contained in DRC-07 dated 01.10.2018 issued by the Respondent No. 3 deserves to be set aside.' Conclusion - The impugned orders suffer from serious infirmity for non-compliance of principles of natural justice and procedural requirement prescribed under the Statute in absence of proper service on the petitioner. The matter is remitted to the respondent no.2/Deputy Commissioner, State Tax, Sector – 8, Noida, Gautam Buddha Nagar to reconsider the matter by issuing a fresh notice to the petitioner within a period of two weeks from today - petition allowed by way of remand. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered in this judgment was whether the assessment order dated 21.09.2020, passed under section 62 of the GST Act, was valid given the procedural irregularities alleged by the petitioner, specifically the non-issuance of a notice under section 46 of the GST Act prior to the assessment order. The secondary issue was whether the appellate order dated 12.06.2024, which upheld the initial assessment, was sustainable in light of these procedural deficiencies.ISSUE-WISE DETAILED ANALYSIS1. Validity of the Assessment Order under Section 62 of the GST ActRelevant Legal Framework and Precedents: The GST Act mandates that before passing an assessment order under section 62, a notice under section 46 must be issued, allowing the taxpayer a period to file the required return. This procedural requirement is crucial for ensuring compliance with the principles of natural justice. The Court referenced a similar case from the High Court of Jharkhand, Vinman Constructions Limited Vs. State of Jharkhand, which highlighted the necessity of issuing a notice under section 46 before proceeding with an assessment under section 62.Court's Interpretation and Reasoning: The Court observed that the assessment order dated 21.09.2020 was passed without prior issuance of the required notice under section 46, which was only issued on 25.09.2020. This sequence of events indicated a clear procedural lapse, as the petitioner was not afforded the opportunity to comply with the notice before the assessment was finalized.Key Evidence and Findings: The record showed that the assessment order was issued on 21.09.2020, while the notice under section 46 was uploaded on 25.09.2020. This discrepancy was central to the Court's finding that the assessment order suffered from a serious procedural defect.Application of Law to Facts: Applying the principles from the GST Act and the precedent set by the Jharkhand High Court, the Court concluded that the assessment order was invalid due to the failure to comply with the mandatory procedural requirements.Treatment of Competing Arguments: The petitioner argued that the lack of notice violated principles of natural justice, while the respondent supported the validity of the orders. The Court favored the petitioner's argument, emphasizing the importance of procedural compliance.Conclusions: The Court held that the assessment order was unsustainable due to the procedural irregularity of not issuing a notice under section 46 before the assessment.2. Sustainability of the Appellate OrderRelevant Legal Framework and Precedents: The appellate authority is expected to review the procedural and substantive correctness of the initial assessment order. The precedent from the Jharkhand High Court case was again relevant, as it underscored the necessity for appellate bodies to address procedural deficiencies in initial assessments.Court's Interpretation and Reasoning: The Court noted that the appellate authority failed to recognize the procedural defect in the initial assessment order. This oversight rendered the appellate decision unsustainable.Key Evidence and Findings: The appellate order did not address the absence of the section 46 notice, focusing instead on the petitioner's failure to file a return within the prescribed period post-assessment.Application of Law to Facts: The Court applied the principles of natural justice and procedural fairness, concluding that the appellate order was flawed due to its failure to address the initial procedural defect.Treatment of Competing Arguments: The respondent's support for the appellate order was dismissed in light of the clear procedural oversight.Conclusions: The appellate order was quashed due to its failure to address the procedural irregularity in the initial assessment.SIGNIFICANT HOLDINGSThe Court held that both the initial assessment order and the appellate order were unsustainable due to procedural defects. The core principle established was the necessity of complying with statutory procedural requirements, particularly the issuance of a notice under section 46 before proceeding with an assessment under section 62. The Court's final determination was to quash both orders and remit the matter for reconsideration, with instructions to issue a fresh notice to the petitioner.The Court stated: 'The impugned orders suffer from serious infirmity for non-compliance of principles of natural justice and procedural requirement prescribed under the Statute in absence of proper service on the petitioner.'In conclusion, the Court allowed the writ petition, quashed the impugned orders, and remitted the matter for reconsideration by the appropriate authority, ensuring adherence to procedural requirements and principles of natural justice.