2025 (5) TMI 762 - HC - GST

Legal Challenge Overturned: Procedural Flaws Invalidate Tax Appeal Order Under CGST Act Section 107(12)

The SC found the appellate authority's order invalid due to procedural violations. The order was passed without notice to the petitioner on 20.01.2022, ... Violation of principles of natural justice - appeal dismissed without hearing the petitioner and without issuing notice on the date it was passed - HELD THAT:- It is not in dispute that the last date fixed was 18.01.2022 and the petitioner did not appear. Instead of passing the order on the date fixed the authority concerned has passed an order dismissing the appeal on 20.01.2022, which shows that on the date on which the impugned order was passed, i.e., on 20.01.2022, the petitioner was never put to notice which itself is in violation of principles of natural justice. In turn, the authorities have passed an ex-parte impugned order. The petitioner might have sought adjournment earlier and did not even appear on the earlier occasion, but if the authority wants to pass an order on the next date fixed, it was incumbent upon the authority to pass an order on the date fixed. If the authority does not pass order on the date fixed, in case of non-appearance on behalf of the counsel for the appellant, if the next date is fixed, then the notice or intimation must be made to the party concerned. Further Section 107 (12) of the CGST Act specifically provides for passing a reasoned and speaking order. The impugned order shows that no proper reason has been assigned. Once the authority wants to pass an order the reason for passing such order must be given. In the case in hand, the authority has simply dismissed the appeal without proper reason - On this ground also, the impugned order cannot be sustained. The impugned order dated 20.01.2022 passed by the respondent no.1 cannot be sustained in the eyes of law. The matter requires reconsideration - Petition allowed by way of remand. The core legal questions considered in this case are:Whether the impugned order dismissing the appeal without hearing the petitioner and without notice on the date it was passed violates the principles of natural justice.Whether the authority was obligated under the relevant statutory provisions to pass a reasoned and speaking order on the merits of the appeal.Whether the procedure followed by the appellate authority in passing the impugned order complies with the requirements under the UPGST Act, 2017 and the CGST Act.Issue-wise detailed analysis:1. Violation of Principles of Natural Justice Due to Passing of Ex-Parte Order Without NoticeRelevant legal framework and precedents: The principles of natural justice require that no order affecting the rights of a party should be passed without giving that party an opportunity to be heard. The Court referred to the precedent set in the judgment of this Court in the case of M/S Videocon D2H LTD., which emphasized the necessity of notice and opportunity before passing an order adverse to a party. The CGST Act and UPGST Act do not explicitly dispense with this requirement in appeal proceedings.Court's interpretation and reasoning: The Court noted that the last date fixed for hearing was 18.01.2022, on which the petitioner did not appear. However, instead of passing the order on that date, the appellate authority passed the order dismissing the appeal on 20.01.2022 without giving any notice or intimation to the petitioner. This was held to be a violation of natural justice since the petitioner was not put to notice on the date the order was passed, rendering the order ex-parte and invalid.Key evidence and findings: The record showed the non-appearance of the petitioner on 18.01.2022 and the subsequent passing of the order on 20.01.2022 without notice. The authority's own observations indicated that the petitioner had lost interest, but no procedural safeguards were followed to inform the petitioner of the change in the date of order.Application of law to facts: The Court applied the principle that if an order is not passed on the date fixed and is deferred to a subsequent date, the party must be given notice of the new date. The absence of such notice invalidated the order passed on 20.01.2022.Treatment of competing arguments: The State argued that ample opportunity had been provided and the petitioner avoided the hearing. The Court rejected this argument on the ground that procedural fairness requires notice of the actual date of order, which was not given.Conclusion: The impugned order was held to be violative of natural justice and hence unsustainable on this ground.2. Requirement of Passing a Reasoned and Speaking Order Under Section 107(12) of CGST ActRelevant legal framework and precedents: Section 107(12) of the CGST Act mandates that appellate authorities must pass reasoned orders on the merits of the case. The Apex Court's judgment in Assistant Commissioner, Commercial Tax Department, Works Contract & Leasing, Kota Versus M/s Shukla & Brothers was cited, which deprecated passing of non-speaking or non-reasoned orders.Court's interpretation and reasoning: The Court observed that the impugned order merely dismissed the appeal without assigning proper reasons. Such a practice is contrary to the statutory requirement and judicial precedent, which insists on reasoned orders to ensure transparency and accountability.Key evidence and findings: The order itself was examined and found to lack any detailed reasoning or explanation for dismissal, other than a brief and vague observation about the petitioner's interest.Application of law to facts: The statutory mandate and judicial guidance were applied to conclude that the order failed to meet the minimum standards of reasoned adjudication.Treatment of competing arguments: The State did not specifically contest the requirement of a reasoned order but relied on procedural default by the petitioner. The Court held that irrespective of procedural lapses, the authority must pass a reasoned order.Conclusion: The impugned order was legally deficient for lack of proper reasoning and thus unsustainable.3. Procedural Compliance and Opportunity to be HeardRelevant legal framework and precedents: The combined reading of the UPGST Act, 2017 and CGST Act requires that appeal proceedings be conducted fairly with due opportunity to the appellant. The Court relied on the principles enshrined in the cited precedents and statutory provisions.Court's interpretation and reasoning: The Court emphasized that the appellate authority must ensure that the appellant is given a fair chance to present the case before passing any order. The absence of notice on the date of order and failure to pass a reasoned order violated this procedural fairness.Key evidence and findings: The petitioner's absence on the fixed date and the subsequent passing of the order without notice or hearing were critical facts.Application of law to facts: The Court held that the authority's failure to pass the order on the fixed date and to notify the petitioner of the subsequent date amounted to procedural impropriety.Treatment of competing arguments: The State's contention that the petitioner avoided hearing was not accepted as justification for the procedural lapses.Conclusion: Procedural non-compliance rendered the impugned order invalid.Significant holdings:'It is not in dispute that the last date fixed was 18.01.2022 and the petitioner did not appear. Instead of passing the order on the date fixed the authority concerned has passed an order dismissing the appeal on 20.01.2022, which shows that on the date on which the impugned order was passed, i.e., on 20.01.2022, the petitioner was never put to notice which itself is in violation of principles of natural justice.''Section 107 (12) of the CGST Act specifically provides for passing a reasoned and speaking order. The impugned order shows that no proper reason has been assigned. Once the authority wants to pass an order the reason for passing such order must be given.''The impugned order dated 20.01.2022 passed by the respondent no.1 cannot be sustained in the eyes of law.'The Court quashed the impugned order and remanded the matter back to the appellate authority to decide the appeal on merits after giving due opportunity of hearing to the petitioner, preferably within three months from the production of the certified copy of the judgment.