2025 (11) TMI 360 - HC - GST

Ex parte adjudication set aside for breaching natural justice and exceeding show-cause scope; matter remitted for fresh hearing

HC set aside the ex parte adjudication order for violating principles of natural justice and for exceeding the scope of the show-cause notice. The court ... Principles of natural justice - Ex-parte impugned order - opportunity of hearing not provided before passing adjudication order - scope of SCN - HELD THAT:- It cannot be denied that the impugned order has been passed on the basis of show cause notice dated 03.08.2022. That notice was issued under Section 130 read with Section 122 of the CGST Act, 2017 proposing the demand. The impugned order has been passed after more than two years amongst others confirming demand under Section 74 (1) of the CGST Act, 2017. Clearly, to that extent the impugned order has travelled beyond the scope of the show cause notice. In fact, upto 03.08.2022, no proceeding had been initiated against the petitioner under Section 74 of the CGST Act, 2017. No useful purpose may be served in relegating the present petitioner to the forum of alternative remedy when the adjudication order is found deficient on jurisdictional ground as also for reason of violation of principles of natural justice and fairness in quasi judicial proceedings. The impugned order is set aside. The matter is remitted to respondent no. 2 to pass an appropriate order after fixing proper date for hearing and after dealing with the objection that may be raised and pressed by the petitioner - Petition disposed off by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudication order passed without fixing any further hearing date and without further communication to the respondent (after earlier participation in hearings) constitutes a breach of principles of natural justice rendering the order ex parte and vulnerable to quashing. 2. Whether an adjudication order can validly confirm a demand under a provision (Section 74) which was neither the subject-matter of the original show cause notice nor the subject of any prior proceedings against the respondent up to the date of that notice - i.e., whether the impugned order travelled beyond the scope of the show cause notice. 3. Whether, in circumstances where the impugned order suffers from jurisdictional and natural justice defects, the writ court should remit the matter for fresh adjudication rather than relegating the petitioner to alternative statutory remedies (appeal). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Natural justice: hearing and ex parte decision Legal framework: Principles of natural justice require that a person affected by quasi-judicial adjudication be given a fair opportunity of hearing, including reasonable notice of any further hearing and an opportunity to address additional material or issues that will be considered before finalizing adverse orders. Precedent Treatment: No specific precedents were cited in the judgment. The Court applied well-established principles of natural justice as the governing standard. Interpretation and reasoning: The Court found that after the petitioner had participated in hearings (last noted on 14.10.2024), the adjudicating authority passed a comprehensive order on 03.02.2025 without fixing any further hearing date or issuing any further communication. The timing and the absence of any further notice made it impossible for the petitioner to respond to the additional findings and the final determination; thus the order effectively operated ex parte in relation to material and conclusions crystallized after the last hearing. The Court held that passing a detailed adjudication after an unexplained lapse and without contemporaneous communication violated fairness and natural justice in quasi-judicial proceedings. Ratio vs. Obiter: Ratio - an adjudicating authority must fix a further hearing date or give fresh notice before passing an order that considers or confirms matters not already fully ventilated in prior hearings; failure to do so constitutes a breach of natural justice rendering the order susceptible to quashing. Obiter - none additional. Conclusions: The impugned order was deficient for violating principles of natural justice and was therefore liable to be set aside on this ground. Issue 2 - Travelling beyond scope of show cause notice (confirmation under a new provision) Legal framework: An adjudication order must ordinarily remain within the ambit of the show cause notice; a notice defines the issues to be adjudicated and parties must be given opportunity to meet those allegations. Introducing or confirming chargeable liabilities under a provision not contemplated by the notice breaches procedural fairness and exceeds delegated jurisdiction. Precedent Treatment: The Court did not rely on specific authority but applied settled administrative law principles that an adjudicatory conclusion cannot be founded on a provision or claim that was not the subject of the original show cause notice or subsequent proceedings affording opportunity to reply. Interpretation and reasoning: The show cause notice dated 03.08.2022 was issued under Section 130 read with Section 122 proposing certain demands; up to that date no proceeding under Section 74 had been initiated. The impugned order, rendered on 03.02.2025, confirmed a demand under Section 74(1) - a liability outside the scope of the original notice and unanticipated by the petitioner. The Court concluded that to that extent the order travelled beyond the scope of the show cause notice and was therefore not sustainable. Ratio vs. Obiter: Ratio - confirmation of a demand under a statutory provision that was not part of the original show cause notice and was never the subject of prior proceedings against the affected party renders the adjudication invalid to that extent for exceeding the scope disclosed in the notice. Obiter - procedural timelines or limitations for issuing fresh notices were applied but not developed as standalone rules. Conclusions: The portion of the impugned order confirming demand under Section 74(1) was outside the scope of the original show cause notice and invalid; the overall order therefore suffered from jurisdictional defect to that extent. Issue 3 - Appropriate remedy: quashing and remittal vs. relegation to alternative statutory remedy Legal framework: Where an adjudication is vitiated by jurisdictional error or denial of natural justice, constitutional writ jurisdiction may be invoked to set aside the order; the court must then determine whether to remit the matter for fresh consideration or to require the aggrieved party to pursue statutory appeal, factoring in adequacy of alternative remedies and the nature of the defect. Precedent Treatment: The Court applied general principles on the exercise of discretionary relief by writ jurisdiction without citing specific authorities in the text. Interpretation and reasoning: Given the dual defects - jurisdictional excess (confirmation under Section 74 not in notice) and violation of natural justice (no further hearing/notice) - the Court held that relegation to alternative remedy would not be useful because the adjudication itself was materially deficient. The Court therefore quashed the impugned order and remitted the matter to the adjudicating authority for fresh adjudication after fixing proper hearing dates and considering objections the petitioner may raise. A limited timeframe (three months) and undertaking by the petitioner not to seek undue adjournments were directed to secure expedition. Ratio vs. Obiter: Ratio - where an adjudication order is vitiated by jurisdictional excess and denial of fair hearing, the writ court may set aside the order and remit the matter for fresh adjudication rather than insist on statutory appeal; remedial directions (fresh hearing, opportunity to raise objections, timeframe) are appropriate. Obiter - the Court's observation that the order was appealable (raised by the revenue) was noted but not treated as determinative. Conclusions: The impugned order was set aside; the matter was remitted for fresh adjudication with directions to fix proper hearing dates, deal with the petitioner's objections, and complete the exercise within a specified period.