GST adjudication order set aside for violating Section 75(4) and natural justice due to improper SCN service, no hearing

HC held that the adjudication order dated 6 March 2023 was passed in violation of Section 75(4) of the GST Act, 2017 and principles of natural justice, as no personal hearing was granted and the SCN was not properly served or made available to petitioners, depriving them of an opportunity to reply. Despite availability of an appellate remedy under Section 107, HC declined to relegate petitioners to appeal, following its earlier view that improper service leading to lack of adjudication warrants interference. The impugned adjudication order was set aside, with the matter to be reconsidered by the authority after proper service of SCN and affording petitioners an opportunity of hearing. The petition was disposed of.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether uploading of the show-cause notice and adjudication order only under the "Additional Notices and Orders" tab on the GST portal constituted due service/communication in compliance with statutory requirements and principles of natural justice.

1.2 Whether non-grant of an opportunity of personal hearing, when an adverse decision was contemplated under Section 73 of the 2017 Act, violated Section 75(4) and the principles of natural justice so as to vitiate the adjudication order.

1.3 Whether, despite the availability of an appellate remedy under Section 107 of the 2017 Act, the writ jurisdiction could be invoked and the matter remanded, and what would be the effect of setting aside the order on limitation and revival of proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of service by uploading under "Additional Notices and Orders" tab

Interpretation and reasoning

2.1 The Court noted that all notices in the Section 73 proceedings and the adjudication order were uploaded only under the "Additional Notices and Orders" tab on the GST portal and not under the main "Notices and Orders" tab.

2.2 It was undisputed that no other mode of service was adopted and that the petitioners came to know of the proceedings only after receipt of a recovery notice by e-mail, upon which they searched the portal.

2.3 Relying on an earlier coordinate Bench decision in a similar factual situation, the Court accepted that accessibility of notice only under the additional tab, as opposed to the normal tab, could not constitute proper communication or uploading as contemplated under Section 73(1) of the 2017 Act read with the relevant Rules.

2.4 On this basis, the Court held that the petitioners could not be treated as having had due knowledge of the proceedings and were prevented by sufficient cause from filing a reply to the show-cause notice.

Conclusions

2.5 Uploading the show-cause notice and order only under the "Additional Notices and Orders" tab did not amount to due or proper service/communication on the petitioners.

2.6 The resultant deprivation of an effective opportunity to respond constituted a violation of principles of natural justice.

Issue 2: Violation of Section 75(4) and denial of personal hearing

Legal framework (as discussed)

2.7 The Court referred to Section 75(4) of the 2017 Act, which mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.

Interpretation and reasoning

2.8 The show-cause notice under Section 73 explicitly contemplated an adverse decision against the petitioners.

2.9 Following the reasoning adopted in the earlier coordinate Bench decision quoted in the judgment, the Court reiterated that where an adverse decision is contemplated, the Proper Officer is under a statutory obligation to afford an opportunity of personal hearing before passing an order under Section 73(9).

2.10 It was observed that the petitioners were not afforded any opportunity of personal hearing before the adjudication order was passed, even though adverse consequences were contemplated.

Conclusions

2.11 The adjudication order was passed in violation of Section 75(4) of the 2017 Act.

2.12 The failure to grant a personal hearing, coupled with improper service of the show-cause notice, amounted to an "abject violation" of principles of natural justice and rendered the order unsustainable.

Issue 3: Maintainability of writ despite alternate remedy; remand, limitation and revival

Interpretation and reasoning

2.13 The Court acknowledged the existence of an appellate remedy under Section 107 of the 2017 Act.

2.14 However, guided by prior coordinate Bench decisions where matters were remanded due to lack of proper adjudication arising from improper service and denial of hearing, the Court held that relegating the petitioners to the appellate forum would entail loss of a forum and was not appropriate in the facts of the case.

2.15 The Court therefore exercised writ jurisdiction to set aside the adjudication order dated March 6, 2023 and remanded the matter to the adjudicating authority with liberty to the petitioners to file a reply to the show-cause notice within three weeks.

2.16 It was further clarified that if the petitioners failed to file the reply within the stipulated time, the benefit of the Court's order would not enure to them and the adjudication order would revive.

2.17 On limitation, the Court recorded that the proceedings had been initiated within time and that the adjudication order was being set aside solely on the ground of violation of natural justice due to improper service.

2.18 The Court therefore held that the petitioners would not be entitled to object to the continuation of the proceedings on the ground of limitation, except to the extent any such ground was (or would have been) available at the time of issuance of the show-cause notice dated January 20, 2023.

Conclusions

2.19 Writ jurisdiction was held to be invocable despite the availability of an appellate remedy, in view of clear violations of principles of natural justice.

2.20 The adjudication order was set aside and the matter remanded with directions: (i) petitioners to file reply within three weeks; (ii) adjudicating authority to pass a fresh order in accordance with law after considering such reply; (iii) no unnecessary adjournments to be granted; (iv) on failure to reply within time, the earlier adjudication order to stand revived.

2.21 The petitioners were barred from raising limitation as a ground against the proceedings, save to the extent such ground existed at the time of issuance of the original show-cause notice.

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