2025 (10) TMI 486 - HC - GST

Adjudication order quashed for natural justice breach; noticee's reply ignored, hearings not fixed; conditional reinstatement on Rs.8,17,000 deposit

M/s Uday Glass House Versus State Of Uttar Pradesh And Another

HC held the adjudication order vitiated for breach of natural justice: no fresh hearing date was fixed, the noticee's reply was not considered and the ... Violation of principles of natural justice - no date for personal hearing was fixed, before passing adjudication order - the reply furnished by the petitioner not considered by adjudicating authority - HELD THAT:- In the first place it cannot be denied that under the provisions of U.P. G.S.T Act, 2017 opportunity of personal hearing demanded by the noticee, must be provided by the adjudicating authority, unless specific reasons are assigned. Second, it is equally settled in law that any adverse order that carries civil consequences must be founded on reasons to support the conclusions and where such an order is preceded by a show cause notice to which reply has also been furnished by the noticee, the order must contain reasons to deal with the objections contained in such reply. Third, where the order is not passed on the date communicated to the noticee, a further notice for the next date of hearing must be issued before a valid order may be passed. In the present case, those settled principles have not been followed. Neither reasons appear to have been assigned to deal with the objections raised by the petitioner nor any further notice was issued to the petitioner for the date 27.02.2025. The fact also cannot be overlooked that the petitioner had due notice of the date fixed i.e. 06.01.2025, inasmuch as that date was communicated to him vide show cause notice dated 28.11.2024 wherein amongst others the petitioner was also required to file reply. That part of the notice was complied. Therefore, its further conduct in not appearing on the date fixed is unexplained. Further the petitioner slept over the situation for one and half month. Curiously it filed the adjournment application on the very date when the adjudication order came to be passed. The impugned order is set aside subject to petitioner depositing Rs. 8,17,000/- (roughly 10% of the disputed demand of tax), within a period of one month from today - Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudication order under the U.P. G.S.T. Act, 2017 that is passed without issuing fresh notice of the hearing date (after an earlier fixed date passed without an order) and without assigning reasons addressing the noticee's written reply violates the principles of natural justice. 2. Whether an adjudication order which carries civil consequences must contain reasons dealing with objections raised in the noticee's response to the show cause notice. 3. Whether a writ petition challenging such an order is maintainable when the noticee failed to appear on the originally fixed hearing date, delayed approaching the Court, and filed the writ after an unexplained lapse (laches), including whether laches disentitles the noticee to relief or requires balancing of equities. 4. What is the appropriate remedial course where the impugned order is procedurally defective but the noticee has unexplained delay and questionable conduct suggesting informal communications with the authority (i.e., whether conditional setting aside with deposit and fresh hearing by a different officer is appropriate). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Natural Justice: requirement of personal hearing and notice of adjourned date Legal framework: Under the U.P. G.S.T. Act, 2017 an opportunity of personal hearing demanded by the noticee must be provided by the adjudicating authority unless specific reasons are recorded for not doing so. Where an order is not passed on the date communicated to the noticee, a further notice for the subsequent date of hearing must be issued before a valid order may be passed. Precedent Treatment: The Court treated these principles as settled law and applied them to the facts; no precedent was overruled or distinguished. Interpretation and reasoning: The adjudicating authority fixed a hearing date in the show cause notice (06.01.2025). The authority did not pass any order on that date, did not fix any further date publicly, and did not issue any subsequent notice to the noticee. The final order was passed on 27.02.2025 without any evidence that the noticee received notice of that hearing date; indeed, the noticee's adjournment application was filed on the very date the order was passed. The Court found that the statutory requirement to provide a hearing opportunity and to notify the noticee of any subsequent hearing date was not complied with. Ratio vs. Obiter: Ratio - failure to issue fresh notice of the hearing (after the earlier date passed without order) vitiates the adjudication because it breaches the statutory and natural justice requirement of an effective opportunity of personal hearing. (See cross-reference to Issue 2 on reasons.) Conclusions: The impugned order is procedurally defective for lack of notice of the subsequent hearing date and denial of the effective right to personal hearing. Issue 2 - Requirement of reasons in orders carrying civil consequences where reply was filed Legal framework: Any adverse order carrying civil consequences must be founded on reasons, and where a show cause notice has elicited a written reply, the final order must contain reasons dealing with the objections raised in that reply. Precedent Treatment: The Court relied upon settled principles requiring reasoned orders in such contexts; no authority was rejected. Interpretation and reasoning: The petitioner filed a reply on 17.12.2024 to the show cause notice. The final adjudication order does not disclose any consideration of that reply nor assigns reasons dealing with the objections therein. The absence of reasons deprived the order of a necessary foundation and transparency required by law when civil consequences follow. Ratio vs. Obiter: Ratio - an adjudication order that affects civil liabilities must contain reasons addressing the noticee's written objections; absence of such reasons renders the order unsustainable on natural justice and reasoned-decision grounds. Conclusions: The impugned order is unlawful for failure to assign reasons dealing with the reply to the show cause notice. Issue 3 - Laches, delay, and conduct of the noticee: effect on entitlement to relief Legal framework: The availability of extraordinary writ relief is subject to equitable considerations, including promptness in approaching the Court. Unexplained delay or laches can disentitle a litigant to relief or may require conditioning of relief to balance interests of justice. Precedent Treatment: The Court applied equitable principles regarding laches and condonation; no precedents were overruled but the Court emphasized established discretion to refuse or condition relief where conduct is dilatory or unexplained. Interpretation and reasoning: The noticee failed to appear on the originally fixed hearing date (06.01.2025) despite having been duly notified. The authority passed its order on 27.02.2025; the noticee filed an adjournment application on that same date. The writ petition challenging the order was filed approximately six months later and beyond the 90-day period considered a reasonable timeline to seek extraordinary relief. The explanation offered in the petition was held vague and not demonstrative of reasons beyond the noticee's control. The Court also noted circumstantial indicia suggesting possible informal communications between the parties that coincided with the order's passing. Ratio vs. Obiter: Ratio - delay and unexplained conduct can justify conditioning relief; laches does not automatically preclude relief where a substantive illegality is shown, but equitable balancing is required. Conclusions: The noticee's unexplained absence, delayed challenge and general conduct militated against unconditional setting aside; equitable considerations required conditioning of relief to prevent casual or opportunistic invocation of the writ jurisdiction. Issue 4 - Appropriate remedial course: conditional setting aside, deposit and fresh hearing by different officer Legal framework: When an impugned order is procedurally defective but the applicant has engaged in laches or dubious conduct, the Court may grant relief subject to conditions (e.g., deposit) and direct a fresh adjudication by an appropriate authority to balance competing public and private interests. Precedent Treatment: The Court followed the established remedial approach of conditional relief and remit for fresh consideration by an officer other than the one who passed the impugned order. Interpretation and reasoning: Recognizing the procedural defects (lack of fresh notice and absence of reasons) that rendered the order unsustainable, and balancing that against the petitioner's unexplained delay and conduct, the Court set aside the impugned order subject to a monetary condition: deposit of approximately ten percent of the disputed tax demand within one month. Upon deposit, the matter is to be reheard and a final order passed not later than a specified date by an adjudicating authority to be nominated by the Commissioner, other than the officer who passed the impugned order. The petitioner undertook not to seek undue or long adjournments. The deposit was ordered to remain subject to the final adjudication. Ratio vs. Obiter: Ratio - where procedural infirmity is established but the petitioner's conduct raises equitable concerns, conditional vacation of the order (deposit + remit to a different officer + time-bound fresh adjudication) is an appropriate and proportionate remedy. Conclusions: The impugned order was set aside subject to (a) deposit of Rs. 8,17,000 (about 10% of the disputed demand) within one month, and (b) fresh hearing and final adjudication by a differently constituted authority within a specified period. The deposit remains subject to the outcome of the fresh adjudication; the petitioner's undertaking against undue adjournments formed part of the equitable balancing.