2025 (11) TMI 188 - HC - GST

Show cause notice fixing reply deadline and personal hearing same time violated natural justice; order set aside, reply allowed

Cosmopolitan Solar Energizer Versus State of West Bengal & Ors.

HC held the procedure violated principles of natural justice because the show-cause notice fixed the last date for filing a reply and the personal hearing ... Violation of principles of natural justice - no effective opportunity to give a reply to the show cause notice was afforded to the petitioner - HELD THAT:- From a conjoint reading of the provisions laid down under sections 73 and 75 of the WBGST Act, this Court is of the considered view that where an adverse decision is contemplated against a person, an opportunity of hearing shall be given to such person - After going through the show cause notice, this Court is of the considered view that an adverse decision was contemplated against the petitioner. Thus, the proper officer was under a statutory obligation to afford an opportunity of hearing to the petitioner. It is well-settled that such opportunity of hearing should not be an idle formality but the same has to be an effective one - However, after going through the detailed show cause notice, it appears that the time limit fixed for filing reply to the show cause notice was within June 15, 2024 and the date of hearing was fixed at about 11.30 a.m. on June 15, 2024. Upon going through the dates mentioned in the detailed show cause notice, it appears that the time was given to file reply to the show cause notice during the entire period of June 15, 2024 and the hearing was fixed at 11.30. a.m. on June 15, 2024. Since the petitioner had engaged a consultant for dealing with the financial matters and it has been alleged that the erstwhile consultant did not take any step in this matter, this Court is inclined to grant a last opportunity to the petitioner to contest the proceeding from the stage of filing the reply to the show cause notice - here no effective opportunity of hearing was passed as there was discrepancy in the dates fixed for filing the reply to the show cause notice and the date of personal hearing, as would be evident from the summary show cause notice. The impugned order dated August 22, 2024 passed by the Assistant Commissioner of State Tax is set aside - petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether, under sections 73 and 75 of the WBGST Act, an adverse determination under section 73(9) can be made without affording an effective opportunity of hearing to the person chargeable with tax. 2. Whether inconsistency and contradiction in dates and timings specified in the show cause notices (summary and detailed) for filing a reply and for personal hearing vitiate the opportunity of hearing as not being effective. 3. Whether the registered person can be relived from consequences of non-filing of reply where non-compliance is attributable to laches or negligence of an engaged consultant/chartered accountant, and whether principles in Rafiq v. Munshilal apply. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Obligation to afford effective opportunity of hearing before determination under section 73(9) Legal framework: Section 73(9) requires the proper officer to determine tax, interest and penalty 'after considering the representation, if any, made by the person chargeable with tax.' Section 75(4) provides that an opportunity of hearing shall be granted where a request is received in writing from the person or where any adverse decision is contemplated. Precedent treatment: The judgment relies on principles of natural justice and established statutory practice that an opportunity of hearing is required where an adverse decision is contemplated; no contrary precedent from the Court was invoked to negate this obligation. Interpretation and reasoning: A conjoint reading of sections 73 and 75 leads to the conclusion that the proper officer is under a statutory obligation to afford an opportunity of hearing before making a determination under section 73(9). The Court treats the requirement to consider representations as coextensive with the requirement to provide an effective opportunity to present such representations where an adverse order is contemplated. Ratio vs. Obiter: Ratio - The Court's holding that an opportunity of hearing is mandatory and must be effective when an adverse decision is contemplated is essential to the decision. Conclusions: The Court concludes that the statutory scheme mandates an effective opportunity of hearing prior to determination under section 73(9), and failure to do so vitiates the impugned order. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Effect of contradictory dates in summary and detailed show cause notices on effectiveness of hearing Legal framework: Show cause notice is the foundation of adjudicatory proceedings; reply to the show cause notice is necessary for effective determination under section 73(9). Natural justice requires clarity and a genuine chance to file representations and attend hearings. Precedent treatment: No specific precedent was applied to the date-contradiction scenario; the Court relied on settled principles that opportunity of hearing must not be an idle formality and must be effective. Interpretation and reasoning: The Court examined the summary and detailed show cause notices and found contradiction and confusion as to the last date for filing reply and the date/time fixed for personal hearing (summary notice fixed hearing prior to the last date for filing reply; detailed notice also fixed hearing on same day but created ambiguity by allowing the entire day to file reply while fixing hearing time that day). Such contradictory fixation renders the opportunity ineffective because it undermines the ability to file a considered reply and to be heard thereafter. Ratio vs. Obiter: Ratio - Contradictory or confusing dates in show cause notices that impair the ability to file reply or attend hearing amount to denial of effective opportunity and vitiate subsequent adjudication. Conclusions: The Court holds that the inconsistencies in the notices resulted in no effective opportunity of hearing being afforded, thereby invalidating the impugned order and necessitating rehearing from the stage of filing reply. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Relief where non-filing of reply is due to consultant's laches - application of Rafiq principle Legal framework: Principles of agency and fairness in adjudicatory proceedings; judicial precedent that a litigant should not be made to suffer for the negligence of his counsel or agent in certain circumstances. Precedent treatment: The Court applied the principle from Rafiq v. Munshilal that a party should not be made to suffer due to laches or negligence of his advocate; the principle was treated as applicable analogously to negligence by an engaged consultant/chartered accountant in tax-administration proceedings. Interpretation and reasoning: The petitioner engaged a consultant for financial matters and alleges that the erstwhile consultant did not take steps or participate. Given the statutory requirement of an effective hearing (Issue 1) and the confused notices (Issue 2), the Court considered whether fairness permits granting a last opportunity. The Court found it appropriate to extend the Rafiq principle to the facts: where a representative's negligence combines with procedural infirmity by the authority, equity favors granting a further opportunity to file reply and be heard. Ratio vs. Obiter: Ratio - Granting a last opportunity where procedural infirmity by the authority (contradictory notices) and alleged agent/consultant negligence co-exist is a permissible remedial step; the Rafiq principle is held applicable in such tax proceedings to prevent penalizing the taxpayer unduly. Conclusions: The Court granted a final opportunity to the petitioner to file reply within a specified time and directed the adjudicating authority to fix hearing and dispose of the matter by a reasoned order within a prescribed timeframe, subject to automatic recall if the petitioner fails to avail the opportunity. ADDITIONAL DIRECTIONS AND CONSEQUENCES (RATIO APPLIED) The Court set aside the impugned order, directed the petitioner to file reply within two weeks of service of the order, directed the adjudicating authority to fix hearing upon receipt of the reply and to decide the matter by a reasoned order after giving a reasonable opportunity of hearing, and imposed an overall four-week timeline from the hearing date for disposal. The Court provided that failure to file reply within the stipulated time would result in automatic recall of the order and dismissal of the writ petition. FINAL OBSERVATIONS The Court emphasized that opportunity of hearing must be effective and not an idle formality; procedural clarity in show cause notices is essential; and equitable relief may be granted where procedural infirmity by the authority and representative negligence coexist, to prevent unjust prejudice to the person chargeable with tax.