Writ Court Can Hear Cases Despite Alternate Remedies If Natural Justice Violated Under CBIC Guidelines

The HC allowed the appeal, holding that the writ court could exercise jurisdiction despite the availability of an alternate remedy, as the State Tax Authority acted in violation of natural justice and contrary to CBIC guidelines. The impugned order relied solely on the Central Tax Authority's verification report without providing the petitioner an opportunity to object or be heard, rendering the order procedurally improper. The court directed the State Tax Authority to treat the verification report as information, furnish it to the petitioner, invite objections, seek comments from the Central Tax Authority on those objections, and conduct a personal hearing before passing a reasoned order. The earlier order was quashed for non-compliance with the prescribed procedure and principles of natural justice.

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ISSUES:

Whether the existence of an alternate remedy bars the exercise of jurisdiction by the Constitutional Court under Article 226 of the Constitution.Whether the State Tax Authority was bound to accept the verification report of the Central Tax Authority without independent consideration.Whether the procedure prescribed by the Central Board of Indirect Taxes and Customs' circular dated 10th November, 2022, was followed in denying the transitional credit claimed by the appellant.Whether denial of transitional credit without providing an opportunity of personal hearing and without passing a reasoned order violates the principles of natural justice.

RULINGS / HOLDINGS:

The Court held that the existence of an alternate remedy is not always a bar for the Constitutional Courts to exercise jurisdiction under Article 226, especially where the authority has acted without jurisdiction or in violation of principles of natural justice.The State Tax Authority is not bound by the verification report of the Central Tax Authority and must independently decide on the admissibility of transitional credit as per clause 5.3.7 of the guideline; treating the report as conclusive would render the guideline redundant.The procedure laid down in the circular/guideline dated 10th November, 2022, including issuance of notice, opportunity for explanation, and personal hearing, must be strictly followed before denying transitional credit.The impugned order denying transitional credit without considering the appellant's rebuttal and without passing a reasoned order violates the principle of natural justice and is liable to be set aside.

RATIONALE:

The Court applied settled legal principles under Article 226 of the Constitution, recognizing exceptions to the bar of alternate remedy where jurisdictional errors or natural justice violations occur.The Court relied on the circular/guideline issued by the Central Board of Indirect Taxes and Customs dated 10th November, 2022, which prescribes a detailed procedure for verification and adjudication of transitional credit claims, including clauses 5.3.5 to 5.3.8.The Court emphasized that clause 5.3.7 confers independent decision-making power on the jurisdictional tax officer, requiring a reasoned order after considering the verification report, applicant's submissions, and comments from the counterpart officer.The Court found that the impugned order failed to comply with the procedural safeguards mandated by the guideline and principles of natural justice, warranting interference by the Writ Court.

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