2025 (11) TMI 115 - HC - GST

Adjudication order set aside; matter remitted to State Tax Officer to rehear Section 74 GST show-cause notice with hearing

HC set aside the adjudication order dated 23 July 2025 and remitted the matter to the State Tax Officer, Ganjam Circle-I, to proceed afresh on the ... Challenge to adjudication order - figures of tax, interest and penalty mentioned therein does not commensurate with the reasoned order passed and enclosed thereto - non-application of mind - violation of principles of natural justice - HELD THAT:- This Court is satisfied that the periods stated in the show cause notice and the order impugned does not match. Therefore, indulgence in the matter is warranted. This Court, hence, sets aside the order dated 23rd July, 2025 and remit the matter to the State Tax Officer, Ganjam Circle-I, Ganjam, Berhampur to proceed further with the show-cause notice dated 16th May, 2025 issued under Section 74 of the GST Act and pass adjudication order afresh after affording the petitioner opportunity of hearing. It is clarified that this Court has not expressed any opinion on the merits of the adjudication. The petitioner is at liberty to raise objections as is available to it under law and participate in the proceeding. The authority concerned is free to pass reasoned order thereon without being influenced by any of the observation made. The entire exercise shall be completed within a period of two months from date. The writ petition is disposed of. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudication order passed under Section 74 of the GST Act is vitiated where the tax periods referred to in the final order do not correspond with the tax periods mentioned in the show-cause notice. 2. Whether a writ under Articles 226 & 227 of the Constitution is maintainable to quash and remit a GST adjudication order where there is apparent non-application of mind or mechanical computation in the demand notice arising from mismatch of periods and figures. 3. Whether the appropriate remedy on finding such clerical or material discrepancies is to set aside the order and remit the matter to the assessing/adjudicating authority for fresh adjudication after affording opportunity of hearing, and whether the Court should express any opinion on the substantive merits when remitting. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of adjudication where order periods do not match show-cause notice periods Legal framework: Adjudication under Section 74 of the Central/State GST Acts must proceed upon the show-cause notice specifying the tax periods under consideration; principles of fair adjudication require that the demand be based on the matters and periods put to notice and that the order reflect reasoned consideration of those matters. Precedent Treatment: No prior decisions were cited or relied upon by the Court in the judgment; therefore no precedent was followed, distinguished or overruled in the present reasoning. Interpretation and reasoning: The Court examined the record and found an inconsistency between the periods mentioned in the show-cause notice and the figures and calculations in the final order. The summary portion of the adjudication referred to April 2020-March 2021, while the numerical calculations and appended table reflected figures pertaining to earlier years (2018-19 and 2019-20). Such mismatch indicates that the demand as quantified in the order does not correspond to the periods that were the subject of the show-cause notice. The anomaly suggested non-application of mind or mechanical computation rather than a reasoned adjudication on the matters actually put in issue. Ratio vs. Obiter: Ratio - An adjudication order under the GST Act is vitiated when the demand quantified in the order does not correspond to the tax periods specified in the show-cause notice, because that reflects a failure to adjudicate on the notice as issued. Conclusions: The Court held that the discrepancy between notice periods and the figures in the order rendered the adjudication infirm and justified interference. Issue 2 - Maintainability of writ remedy for quashing and remittal where there is apparent non-application of mind Legal framework: Articles 226 & 227 confer jurisdiction to supervise and correct administrative orders which are illegal, perverse, or suffer from non-application of mind; administrative action must be reasoned and in conformity with principles of natural justice, including fair notice and opportunity to be heard. Precedent Treatment: No specific authorities were invoked; Court's approach is based on supervisory constitutional jurisdiction to correct patent procedural or substantive defects demonstrated on the record. Interpretation and reasoning: The Court found on the record - and the Department's counsel conceded - that the calculations in the adjudication did not match the periods mentioned in the notice, establishing a prima facie defect of a clerical/material mismatch and lack of proper adjudicative application. Given the concession and documentary inconsistency, the Court considered it appropriate to exercise writ jurisdiction to set aside the order and remit the matter for fresh adjudication rather than to attempt to resolve the factual or substantive disputes within the writ proceeding. Ratio vs. Obiter: Ratio - Where an adjudication order displays manifest inconsistency with the issuing show-cause notice and indicates non-application of mind, supervisory jurisdiction under Articles 226/227 permits setting aside and remitting the matter for fresh adjudication after affording opportunity to the party. Conclusions: The Court held the writ petition maintainable and ordered the impugned order set aside and remitted for fresh adjudication consistent with the show-cause notice. Issue 3 - Appropriate remedial course and scope of judicial commentary on merits when remitting Legal framework: Remittal is an accepted remedy where administrative orders are vitiated by procedural defects, with courts generally avoiding expression of views on the substantive merits so as not to pre-empt the adjudicating authority's fresh exercise of jurisdiction; affected parties must be afforded opportunity to raise objections as available under law. Precedent Treatment: The judgment does not cite precedent but follows established supervisory practice of remittal without deciding merits. Interpretation and reasoning: The Court, having set aside the order, directed the assessing authority to proceed afresh on the show-cause notice and to afford the petitioner a hearing. The Court explicitly refrained from expressing any opinion on the merits of the underlying tax demand and clarified that the authority is free to pass a reasoned order uninfluenced by the Court's observations. A time-bound direction of two months was given to complete the process, and liberty was preserved to the petitioner to raise all available objections. Ratio vs. Obiter: Ratio - On finding procedural infirmity manifest on record, the appropriate remedy is remittal to the adjudicating authority to re-adjudicate after opportunity of hearing, with the court abstaining from opining on merits; time-limits may be imposed to ensure expeditious disposition. Conclusions: The Court ordered remittal for fresh adjudication in accordance with the show-cause notice, directed compliance with principles of natural justice, restrained itself from expressing any opinion on substantive merits, and imposed a two-month timeline for completion of the exercise. Cross-references The findings on Issues 1 and 2 are interlinked: the material mismatch of tax periods (Issue 1) constituted non-application of mind warranting exercise of writ jurisdiction and remittal (Issue 2). The remedy described in Issue 3 follows from the Court's conclusions on Issues 1 and 2.