2025 (11) TMI 668 - HC - GST

Impugned orders quashed for natural justice breach; matters remitted for fresh de novo hearing after 10% deposit

Tvl. Arokya Enterprises, Rep. by its Proprietor, Arockia Willfred J Versus The Deputy Commissioner (ST), The Assistant Commissioner (ST), The Branch Manager, Axis Bank, Chennai, The Branch Manager, ICICI Bank Ltd, Chennai

The HC quashed the impugned orders dated 29.11.2023 and 30.11.2023 for violation of natural justice and remitted the matters to the first ... Violation of principles of natural justice - impugned order passed without affording an opportunity of being heard - HELD THAT:- The impugned orders dated 29.11.2023 and 30.11.2023 are quashed and the matters are remitted back to the first respondent / Appellate Authority to pass fresh orders on merits, after affording due opportunity of personal hearing to the petitioner - The petitioner, shall, however, deposit the balance 10% of the disputed tax amount, over and above the amount already deposited at the time of filing the appeals before the respondent - Upon such deposit of 10% of the disputed tax against the demand confirmed in each of the impugned orders, the first respondent shall pass de nova orders after hearing the petitioner. remitted back to the first respondent-Appellate Authority to pass a fresh order on merits after hearing the petitioner. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the impugned appellate orders, passed on dates shown without granting the petitioner's request for adjournment and without affording a personal hearing, are violative of the principles of natural justice and therefore liable to be set aside. 2. Whether the impugned orders being unsigned and not served on the petitioner, with the petitioner becoming aware only upon receipt of a later recovery notice, affect the validity of the orders and the timeliness of challenge. 3. Whether the Court should interfere with the merits of the impugned orders which address alleged facilitation of ineligible input tax credit by the petitioner, particularly in view of the authority relied upon by the Appellate Authority. 4. Whether, pending remand or challenge before the appropriate appellate Tribunal, the petitioner is required to make a deposit (10% of the balance disputed tax) as a condition for further consideration, and whether such a deposit condition is permissible. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Procedural fairness: refusal of adjournment and absence of personal hearing Legal framework: Principles of natural justice (audi alteram partem) require that an affected person be given a reasonable opportunity to be heard before an adjudicatory order is passed. Administrative and quasi-judicial authorities must afford personal hearing if requested and must not decide without providing opportunity unless statutory procedure dispenses with it. Precedent Treatment: The Court considered the impugned orders as decisions made on merits by the Appellate Authority and noted that the Appellate Authority proceeded on the hearing date when the petitioner sought adjournment. The impugned orders rely on precedent considered by the Authority but the Court did not rest the validity of the orders on that precedent where hearing was not afforded. Interpretation and reasoning: The Court found that the Appellate Authority passed the impugned orders on the same day the matters were listed and when the petitioner sought adjournment, without granting further adjournment or affording personal hearing. This procedural omission is material irrespective of the detailed reasoning contained in the orders. The absence of an opportunity for the petitioner to be heard vitiates the impugned orders even if the orders are otherwise reasoned. Ratio vs. Obiter: Ratio - where an adjudicatory order is passed without affording requested opportunity of personal hearing, the order is liable to be quashed and remitted for fresh consideration. Obiter - comments on the sufficiency of reasons in the impugned orders are not decisive when procedural non-compliance is established. Conclusion: The impugned orders were quashed on account of failure to afford the petitioner a personal hearing and the matters were remitted to the Appellate Authority for fresh disposal after hearing. Issue 2 - Validity and service of unsigned orders and effect on limitation Legal framework: Valid judicial or quasi-judicial orders must be authoritative and communicated to the affected party; signature and service are essential formalities for authentication and initiation of limitation for challenge. Non-service can affect the inception of limitation but does not by itself validate an order tainted by denial of hearing. Precedent Treatment: The Court accepted the petitioner's contention that the impugned orders were unsigned and that the petitioner became aware only upon receipt of a later recovery notice; the Court did not treat non-signature/non-service as a bar to relief but as a factor reinforcing procedural infirmity. Interpretation and reasoning: The lack of signature and absence of service are procedural defects that compound the fundamental breach of natural justice. Even if there appears to be delay in approaching the Court, the procedural defect of non-service and unsigned records justified judicial intervention to ensure fair adjudication. The Court prioritized substantive fairness over technical delay where procedural denial of hearing was shown. Ratio vs. Obiter: Ratio - absence of signature/service and consequent non-communication of the order are material, and where combined with denial of hearing justify quashing and remand despite apparent delay. Obiter - detailed analysis of limitation calculations was unnecessary given the procedural quashing. Conclusion: The Court treated the unsigned and unserved nature of the orders as reinforcing the need to quash and remit the matters for fresh adjudication; the petitions were entertained notwithstanding the delay in formal challenge. Issue 3 - Interference with merits where appellate orders deal with facilitation of ineligible input tax credit and reliance on higher authority Legal framework: Courts may decline to re-appraise findings of fact or detailed merits where the impugned order is otherwise within jurisdiction and reasoned, particularly if it follows binding precedent. However, where procedural infirmity (e.g., denial of hearing) exists, the Court will remit for fresh consideration even if the Authority relied on established precedent. Precedent Treatment: The Appellate Authority had followed a Supreme Court decision relied upon in its reasoning. The Court acknowledged that the impugned orders were detailed and premised on that authority but did not allow that to cure the procedural breach identified. Interpretation and reasoning: The Court distinguished between substantive correctness and procedural propriety: even well-reasoned orders that adhere to precedent cannot stand if passed without hearing the affected party. The Court therefore did not decide on the substantive correctness of the findings that the petitioner, as a bill trader, facilitated ineligible input tax credit, but left such questions open for de novo consideration by the Appellate Authority after hearing. Ratio vs. Obiter: Ratio - procedural non-compliance necessitates fresh adjudication on merits regardless of reliance on higher authority. Obiter - observations about the strength of the Authority's reasoning or the applicability of the cited Supreme Court decision were not determinative. Conclusion: The Court declined to enter into merits; the matters were remitted for fresh adjudication on merits after hearing despite the Appellate Authority's reliance on precedent. Issue 4 - Conditional remand: requirement of deposit of 10% of disputed tax under statutory provision as condition for further appellate consideration Legal framework: Statutory provisions permit conditioning the continuation of appellate proceedings on deposit of a percentage of the disputed tax liability to balance revenue protection and the right of appeal. Courts may impose or uphold such deposit conditions when remitting matters for fresh consideration. Precedent Treatment: The Court noted the respondent's submission regarding the statutory requirement (Section 112 of the relevant GST enactments) that a deposit of 10% of the balance disputed tax is required. The Court incorporated this statutory condition into its order as a precondition for de novo hearing before the Appellate Authority. Interpretation and reasoning: The Court ordered that the petitioner deposit the balance 10% of the disputed tax (in addition to amounts already deposited at the time of filing the appeals) as a condition precedent to the Appellate Authority proceeding to pass fresh orders. This balanced the petitioner's right to a fresh hearing with protection of public revenue and aligned with the statutory scheme empowering such conditions. Ratio vs. Obiter: Ratio - where a petition is remitted for fresh consideration because of procedural infirmity, the remand may be subject to a lawful deposit condition consistent with statutory provisions; compliance with the deposit condition is required before the Authority proceeds. Obiter - procedural timelines for the Authority to conclude the matter were recommended as expeditious but are not substantive constraints beyond reasonableness. Conclusion: The Court conditioned the remand on deposit of 10% of the balance disputed tax and mandated that the Appellate Authority, upon such deposit, hear the petitioner de novo and decide within three months of receipt of the Court's order. Cross-references and procedural directions Cross-reference: Issues 1 and 2 are interrelated - denial of hearing (Issue 1) was reinforced by non-signature and non-service (Issue 2), leading to the remedial course addressed in Issues 3 and 4. Directions flowing from conclusions: The impugned orders were quashed and remitted for de novo consideration after personal hearing; the petitioner must deposit the specified statutory amount (10% of balance disputed tax) in addition to prior deposits; the Appellate Authority must hear and decide the matters expeditiously, within three months of receipt of the order, and the petitioner must cooperate in the proceedings.