2025 (7) TMI 777 - HC - GST

Assessment orders under section 74 and rectification orders under section 161 set aside for violating natural justice principles

Boldrocchi India Private Limited Rep. by its General Manager Finance Govindarajan K. Versus THE STATE TAX OFFICER (ST), Joint Commissioner (ST) (Intelligence II), Deputy Commissioner (ST), Kancheepuram

The Madras HC set aside assessment orders passed under section 74 and rectification orders under section 161, finding violation of natural justice ... Violation of principles of natural justice - the reply filed by the petitioner was not taken into consideration by the first respondent while passing the impugned orders - HELD THAT:- It would be pertinent to mention here that whether the/assessee files the reply by way of uploading the same through the Portal or manually, the Assessing Officer is duty bound to pass the assessment orders after taking into consideration of the reply filed by the assessee. In the present case, admittedly, the petitioner has filed the reply manually, therefore, the first respondent ought not to have proceeded to confirm the proposals contained in the show cause notice, in a mechanical manner, on a wrong footing, as if, no reply was filed the petitioner and without even affording an opportunity of personal hearing to the petitioner. Therefore, this Court is of the view that the impugned orders suffer from violation of principles of natural justice and have to be set aside. The orders passed by the first respondent u/s. 74 dated 27.11.2024 and consequential rectification order u/s 161 which are impugned in W.P.Nos.18923, 18927, 18929, 18959, 18962 & 18971 of 2025 are set aside - the matters are remanded back to the first respondent for fresh-consideration, in which case, the first respondent is directed to go-through the reply, which was filed by the petitioner manually and after affording an opportunity of personal hearing to the petitioner by issuing a 14 clear days notice shall decide the matters in accordance with law. Petition allowed by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in these writ petitions are:Whether the assessment orders passed under section 74 and the consequential rectification order under section 161 of the Tamil Nadu General Sales Tax Act, 2017, are valid when the petitioner's reply to the show cause notices was filed manually but was not considered by the assessing authority.Whether the failure of the assessing authority to consider the petitioner's manually filed reply and to afford an opportunity of personal hearing violates the principles of natural justice.Whether the recovery notice issued for the assessment years 2017-18 to 2022-23 is sustainable in light of the above procedural infirmities.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of assessment orders passed without considering the petitioner's reply filed manuallyRelevant legal framework and precedents: The assessment orders were passed under section 74 of the Tamil Nadu General Sales Tax Act, 2017, and rectification under section 161. The principles of natural justice, particularly the right to be heard, are foundational in tax proceedings and administrative law. The Court recognized that the manner of filing replies-whether electronically via the GST Portal or manually-does not absolve the assessing officer from the duty to consider the reply before passing an order.Court's interpretation and reasoning: The Court observed that the petitioner had filed replies and supporting documents manually after the expiry of the portal filing period, due to the voluminous nature of documents and the petitioner's unawareness of the notices issued electronically. Although the assessing officer did not consider the manually filed reply, the Court held that the mode of filing should not prejudice the petitioner's rights. The assessing authority is duty bound to consider any reply filed, regardless of the mode, before passing an order.Key evidence and findings: The petitioner's reply was filed manually on 12.11.2024 and was acknowledged by the respondent. However, the impugned orders were passed as if no reply was filed. The respondents conceded that the manual reply was not considered.Application of law to facts: The Court found that the assessing officer mechanically confirmed the proposals in the show cause notice without considering the petitioner's reply. This amounted to a breach of the principles of natural justice.Treatment of competing arguments: The respondents argued that since the reply was not uploaded on the portal, it was not taken into consideration. However, they fairly submitted that the impugned orders could be set aside and the matter remanded for fresh consideration. The Court rejected the argument that the mode of filing could justify non-consideration.Conclusions: The Court held that the assessment orders passed without considering the petitioner's reply filed manually are invalid and must be set aside.Issue 2: Violation of principles of natural justice due to non-affording of personal hearingRelevant legal framework and precedents: Natural justice requires that before adverse orders are passed, the affected party must be given a reasonable opportunity to be heard, including personal hearing if requested or warranted.Court's interpretation and reasoning: The Court noted that the petitioner was not afforded an opportunity of personal hearing before the impugned orders were passed. This procedural lapse compounded the failure to consider the reply.Key evidence and findings: The record showed no personal hearing was granted, and the orders were passed mechanically.Application of law to facts: The Court emphasized that the assessing authority must issue a notice affording at least 14 clear days for personal hearing before passing orders.Treatment of competing arguments: The respondents did not dispute the absence of personal hearing and agreed to remand the matter for fresh consideration with opportunity for hearing.Conclusions: The Court concluded that the failure to afford personal hearing violated natural justice and warranted setting aside the impugned orders and remanding for fresh consideration.Issue 3: Validity of the recovery notice issued for the period 2017-18 to 2022-23Relevant legal framework and precedents: Recovery notices under the tax statute are contingent upon valid assessment orders. If the assessment orders are invalidated, consequential recovery notices also stand vitiated.Court's interpretation and reasoning: Since the assessment orders were set aside for failure to consider the reply and for violation of natural justice, the recovery notice issued based on those orders could not be sustained.Key evidence and findings: The recovery notice dated 29.04.2025 was challenged in one of the writ petitions and was found to be directly linked to the impugned assessment orders.Application of law to facts: The Court quashed the recovery notice in light of the invalidity of the underlying assessment orders.Treatment of competing arguments: No contrary argument was advanced by the respondents on this point.Conclusions: The recovery notice was quashed.3. SIGNIFICANT HOLDINGS'Whether the assessee files the reply by way of uploading the same through the Portal or manually, the Assessing Officer is duty bound to pass the assessment orders after taking into consideration of the reply filed by the assessee.''The impugned orders suffer from violation of principles of natural justice and have to be set aside.'The Court established the core principle that the mode of filing replies in tax proceedings cannot be a ground for non-consideration by the assessing authority. The assessing officer must consider all replies filed by the assessee and afford an opportunity of personal hearing before passing adverse orders.Final determinations on each issue were:The assessment orders passed under section 74 and the rectification order under section 161 are set aside for failure to consider the petitioner's manually filed reply and violation of natural justice.The matters are remanded to the first respondent for fresh consideration after considering the reply and affording a personal hearing with at least 14 clear days' notice.The recovery notice issued for the period 2017-18 to 2022-23 is quashed.