2025 (5) TMI 557 - HC - GST

Tax Fraud Case: Penalty Upheld with Mandatory Document Disclosure and 30-Day Appeal Window for Taxpayer

SS Enterprises Versus Office Of The Commissioner Central Tax Delhi West And Anr.

SS Enterprises Versus Office Of The Commissioner Central Tax Delhi West And Anr. - 2025:DHC:3300 - DB 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter are:Whether the Petitioner was deprived of a fair opportunity of hearing due to alleged non-receipt or delayed receipt of the personal hearing notice issued under the Central Goods and Services Tax Act, 2017 (CGST Act).Whether the Petitioner was entitled to multiple personal hearings or adjournments beyond what was provided, and the scope of Section 75(5) of the CGST Act regarding adjournments.The validity and legality of the penalty order imposing a penalty of Rs. 36,05,299/- on the Petitioner for alleged involvement in fraudulent availment of Input Tax Credit (ITC) through goods-less invoices.The procedural fairness in the issuance of the impugned order, including the availability of Relied Upon Documents (RUDs) to the Petitioner for effective defense.The appropriate remedy available to the Petitioner, specifically the availability of an appeal under Section 107 of the CGST Act against the impugned order.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Alleged Non-Receipt or Delayed Receipt of Personal Hearing Notice and Fair Opportunity of HearingRelevant Legal Framework and Precedents: The CGST Act mandates that before imposing penalties or adverse orders, the proper officer must provide a reasonable opportunity of hearing to the person chargeable with tax. Section 75(5) of the CGST Act governs adjournments during such hearings, emphasizing procedural fairness.Court's Interpretation and Reasoning: The Petitioner contended that the hearing notice was not received in time, resulting in denial of a fair hearing. However, the Court noted the Petitioner's own averment that the notice dated 09.01.2025 was dispatched on 17.01.2025 and received on 18.01.2025, which was sufficiently prior to the scheduled hearing on 21.01.2025. The Court held that since the notice was received in time for the final hearing date, the Petitioner was not deprived of a reasonable opportunity to present its case.Key Evidence and Findings: The Petitioner's affidavit and pleadings admitted receipt of the notice on 18.01.2025. The procedural timeline showed that although the Petitioner missed earlier hearing dates (13.01.2025 and 16.01.2025), the final hearing date was available for representation.Application of Law to Facts: The Court applied the principle that receipt of notice in time for the final hearing suffices to satisfy the requirement of a fair opportunity. The Petitioner's failure to appear despite notice negates the claim of procedural unfairness.Treatment of Competing Arguments: The Petitioner argued that the delay in dispatch and receipt of notice was a procedural lapse. The Court rejected this, emphasizing the actual receipt date relative to the hearing date and the Petitioner's responsibility to appear.Conclusion: The Court concluded that the Petitioner was not denied a fair hearing and the grievance on this ground is untenable.Issue 2: Entitlement to Multiple Personal Hearings and Interpretation of Section 75(5) of the CGST ActRelevant Legal Framework: Section 75(5) of the CGST Act provides that the proper officer may grant adjournments if sufficient cause is shown but limits such adjournments to a maximum of three during proceedings.Court's Interpretation and Reasoning: The Court clarified that the provision does not mandate that three hearings must be given but restricts the number of adjournments to three. The Petitioner's contention that three personal hearings were not provided was found to be misconceived.Application of Law to Facts: Since the Petitioner was given at least one hearing opportunity and the notice was received in time, the limitation on adjournments was not violated.Conclusion: The Court held that the Petitioner was not entitled to claim denial of hearings beyond what the law permits, and the procedural safeguards under Section 75(5) were complied with.Issue 3: Validity of Penalty Imposed for Alleged Fraudulent Availment of ITCRelevant Legal Framework: The CGST Act penalizes fraudulent availment of ITC through fake or goods-less invoices. The penalty is imposed after due inquiry and hearing.Court's Interpretation and Reasoning: The Court did not delve into the substantive merits of the penalty but noted that the impugned order was appealable under Section 107 of the CGST Act. The Court emphasized that the Petitioner has a statutory remedy to challenge the penalty order before the Appellate Authority.Key Evidence and Findings: The impugned order alleged that the Petitioner received goods-less invoices from firms linked to a third party, resulting in ITC of Rs. 172 crores. The penalty of over Rs. 36 lakhs was imposed accordingly.Application of Law to Facts: The Court refrained from adjudicating the penalty's correctness on merits at this stage, directing the Petitioner to avail the appellate remedy.Conclusion: The penalty order stands subject to appeal and merits determination by the appropriate Appellate Authority.Issue 4: Procedural Fairness and Availability of Relied Upon Documents (RUDs)Relevant Legal Framework: Procedural fairness under the CGST Act requires that the Petitioner be furnished with all documents relied upon by the Department to enable effective defense.Court's Interpretation and Reasoning: The Court acknowledged the Petitioner's grievance regarding non-availability of RUDs. It directed the Department to provide all RUDs within two weeks via email to the Petitioner's counsel.Application of Law to Facts: Ensuring access to RUDs is essential for the Petitioner to prepare and present a meaningful appeal.Conclusion: The Court mandated disclosure of all relied-upon documents to the Petitioner, reinforcing the principle of natural justice.Issue 5: Availability and Procedure for Filing Appeal under Section 107 of the CGST ActRelevant Legal Framework: Section 107 of the CGST Act provides for appeal against orders passed by the proper officer, including penalty orders.Court's Interpretation and Reasoning: The Court held that the impugned penalty order is appealable and directed the Petitioner to file an appeal within 30 days of receiving the RUDs. It further ruled that if the appeal is filed within this period, it shall not be dismissed on limitation grounds and must be adjudicated on merits.Application of Law to Facts: This direction ensures that the Petitioner has a viable remedy and that procedural lapses do not prejudice substantive rights.Conclusion: The Court provided a clear procedural pathway for challenging the penalty order before the Appellate Authority.3. SIGNIFICANT HOLDINGS'The personal hearing notice having been received by the Petitioner and the Petitioner having not availed of the hearing, cannot now be permitted to raise a grievance in respect thereof, against the Department.''Section