Assessment and attachment quashed for violation of natural justice, delay; matter remitted for fresh Section 73 proceedings

HC set aside assessment and summary orders dated 29.01.2025 and quashed attachment, finding violation of principles of natural justice and undue delay in proceedings under Section 73. The court held the petitioner received no personal hearing or effective communication, notices were uploaded only after about 1½ years and went unnoticed, and the petitioner reasonably believed earlier show-cause proceedings were dropped. Matter is remitted to the first respondent for fresh consideration consistent with law; petition allowed by way of remand.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether the assessment order under Section 73 was vitiated by violation of principles of natural justice for failure to afford an effective personal hearing.

2. Whether service of notices solely via the departmental portal (without physical service under Section 169) rendered subsequent assessment and recovery proceedings invalid.

3. Whether the delay of approximately 1½ years in passing an assessment order under Section 73/TNGST Act, 2017 is untenable and warrants interference/remand.

4. Whether, on setting aside the impugned order for procedural defects, the Tribunal/Court may remit the matter for fresh consideration subject to interim conditions (payment of a percentage of disputed tax and de-freeze of bank account).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Violation of principles of natural justice: adequacy of opportunity of personal hearing

Legal framework: Principles of natural justice require that a person against whom adverse proceedings are initiated be afforded a reasonable opportunity of being heard, including an effective personal hearing where statute or practice contemplates one.

Precedent Treatment: The judgment does not cite or apply specific precedents; the Court applied settled principles of natural justice as part of statutory adjudicatory process.

Interpretation and reasoning: The Court examined the sequence of communications: an initial show cause notice fixing a personal hearing; cancellation of a scheduled personal hearing; the petitioner's filing of written replies and supporting documents; subsequent portal-uploaded reminders sent after a lapse of ~1½ years; and absence of any physical service under Section 169. The Court accepted the petitioner's account that after cancellation and no further physical communication, he reasonably believed proceedings were dropped and therefore did not monitor the portal. The Department's reliance on portal-issued reminders alone was held insufficient to establish that an effective opportunity to be heard was afforded.

Ratio vs. Obiter: Ratio - where the Department cancels a scheduled personal hearing and fails to effect physical service, subsequent reliance solely on portal notices (especially after long lapse) negates the requirement of an effective hearing and vitiates the adjudication. Obiter - none specifically stated beyond application to facts.

Conclusion: The impugned order was set aside on the ground of violation of natural justice; the matter was remitted for fresh consideration with a direction to afford personal hearing.

Issue 2 - Mode of service (portal only) vs. statutory physical service under Section 169

Legal framework: Section 169 (as referenced) contemplates physical mode of service in addition to other modes; proper service is integral to fair adjudication and to the opportunity to be heard.

Precedent Treatment: No precedents were cited; the Court applied statutory-service principles to the facts.

Interpretation and reasoning: The Court found that notices/reminders dated much later were uploaded only through the Portal and were not physically served. Given the prior cancellation and the passage of time, the petitioner's non-access of the portal was reasonable. The Department's failure to effect physical service under the statutory provision meant the petitioner did not receive effective notice of the resumed/continued proceedings.

Ratio vs. Obiter: Ratio - service solely via portal, without physical service where physical service is contemplated by statute and where prior communications had primed the petitioner to expect physical communication, can render subsequent proceedings invalid for lack of proper notice. Obiter - none other than factual application.

Conclusion: The Court held that absence of physical service under Section 169 was a material defect rendering the assessment order unsustainable.

Issue 3 - Delay in passing assessment under Section 73 and procedural fairness

Legal framework: Section 73 proceedings require issuance of show cause notice and adjudication; read as a whole, the statutory scheme contemplates that the notice and order should be completed within a reasonable time (Court noted an overall three-month expectation from reading of the provisions).

Precedent Treatment: The Court did not rely on specific case law; it construed the statutory scheme and temporal expectations inherent in the provision.

Interpretation and reasoning: The Court observed a delay of approximately 1½ years between issuance of notices and the impugned order. Even if no express limitation is specified, the overall statutory scheme and fairness demand timely adjudication. The prolonged delay, coupled with the absence of effective personal hearing and inadequate service, weighed against the validity of the order.

Ratio vs. Obiter: Ratio - excessive delay in passing an assessment order under Section 73/TNGST Act, 2017, when coupled with defective notice/hearing, justifies setting aside the order and remanding for fresh consideration. Obiter - the Court's remark that an overall three-month timeline is contemplated is an interpretative observation informing reasonableness.

Conclusion: The assessment order was liable to be set aside on account of inordinate delay in passing the order in the statutory scheme.

Issue 4 - Appropriate relief on setting aside: remand with interim conditions (payment and de-freeze)

Legal framework: Courts have authority to set aside orders for procedural defects and remit for fresh consideration. Courts may impose interim protective or conditional measures to balance competing interests pending fresh adjudication (e.g., deposit of a portion of disputed tax to restrain misuse, and relief from oppressive attachments upon compliance).

Precedent Treatment: No specific precedents cited; the Court exercised equitable discretion consistent with practice in remanding tax matters subject to interim safeguards.

Interpretation and reasoning: The Court determined that although the impugned order was vitiated and required fresh consideration, the public interest and revenue protection warranted an interim condition. The petitioner was directed to pay 10% of the disputed tax within four weeks; upon proof of such payment the bank attachment was to be lifted and the bank account unfrozen; thereafter the Department must afford a personal hearing and pass a fresh order.

Ratio vs. Obiter: Ratio - where an assessment order is set aside for procedural defects, remittal for fresh consideration may be ordered subject to conditional interim measures (e.g., deposit of a percentage of disputed tax and release of attachments upon compliance). Obiter - the specific percentage (10%) and time-frame are pragmatic directions tailored to facts; not elevated to a general rule.

Conclusion: The Court set aside the impugned order, remitted the matter for fresh adjudication after affording personal hearing, and conditioned interim relief on deposit of 10% of disputed tax with immediate de-freeze of the bank account upon proof of payment.

Cross-references and Overall Conclusion

All issues are interrelated: defective service (Issue 2) and cancellation of an expected personal hearing (Issue 1), compounded by protracted delay (Issue 3), collectively rendered the assessment order unsustainable. Consequently, the Court's remedial direction (Issue 4) balanced the petitioner's right to fair adjudication with revenue protection by remanding the matter for fresh consideration after a conditional interim deposit and restoration of banking operations upon compliance.

---