Improper GST portal service violates natural justice, breaches Section 75(4) CGST; adjudication order set aside, remanded

HC held that service of the pre-SCN, SCN and adjudication order solely by uploading them under the "additional notices and orders" tab on the GST portal was not proper service under the GST regime. As the assessee became aware of the proceedings only after recovery from its electronic cash ledger, HC found violation of principles of natural justice and non-compliance with Section 75(4) of the CGST Act, which mandates opportunity of hearing before an adverse order. Following its earlier decision in a factually identical matter, HC set aside the adjudication order dated April 24, 2024 and disposed of the petition, remitting the matter for fresh proceedings in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether service of the pre-show-cause notice in Form DRC-01A, the show-cause notice under Section 73 and the adjudication order by uploading them only under the "additional notices and orders" tab on the GST portal constituted proper and due communication to the assessee.

1.2 Whether passing an order under Section 73 without affording an opportunity of personal hearing, where an adverse decision was contemplated, violated Section 75(4) of the Act of 2017 and the principles of natural justice.

1.3 What consequential directions were warranted upon finding that the adjudication order was not duly communicated and was passed in breach of Section 75(4) and natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of service by uploading notices and order only under "additional notices and orders" tab on GST portal

Legal framework (as discussed)

2.1 The proceedings arose under Section 73 of the WBGST/CGST Act, 2017. The Court referred to a coordinate Bench decision which, relying on a Division Bench decision, held that accessibility of a notice only under the "additional" tab on the GST portal, as opposed to the "normal" tab, does not constitute proper communication or uploading as contemplated under Section 73(1) read with the applicable Rules.

Interpretation and reasoning

2.2 It was undisputed that the pre-show-cause notice in Form DRC-01A, the show-cause notice under Section 73 and the adjudication order were all uploaded only under the "additional notices and orders" tab on the GST portal.

2.3 The petitioners asserted that they had no reason to access the said tab, remained unaware of the notices and the order, and came to know of the proceedings only upon recovery being effected from their electronic cash ledger after issuance of a recovery notice in Form DRC-13 to their bank.

2.4 The Court, following the reasoning in the coordinate Bench decision, held that uploading notices only under the "additional notices and orders" tab cannot be treated as due or proper communication/ service upon a person against whom an adverse decision is contemplated.

2.5 In the light of these facts and precedents, the Court held that it could not be said that the petitioners had due knowledge of the proceedings or the adjudication order at any time proximate to their issuance.

Conclusions

2.6 Service of the pre-show-cause notice, the show-cause notice under Section 73 and the adjudication order solely by uploading them under the "additional notices and orders" tab on the GST portal did not amount to proper or due service/communication in law.

2.7 The petitioners were prevented by sufficient cause from participating in the adjudication and from challenging the order in time, owing to such defective mode of service.

Issue 2 - Requirement of personal hearing under Section 75(4) and principles of natural justice

Legal framework (as discussed)

2.8 The Court reproduced and relied upon a coordinate Bench judgment which interpreted Section 75(4) of the Act of 2017. As there noted, Section 75(4) mandates that an opportunity of hearing shall be granted: (a) where a request in writing is received from the person chargeable with tax or penalty; or (b) where any adverse decision is contemplated against such person.

Interpretation and reasoning

2.9 The coordinate Bench had held that issuance of a show-cause notice under Section 73(1) clearly indicates that an adverse decision is contemplated, thereby triggering the statutory obligation on the Proper Officer to afford an opportunity of hearing before passing an order under Section 73(9).

2.10 The Court found the facts in the present case to be identical to those considered earlier: the show-cause notice contemplated an adverse decision, yet the adjudication order was passed without granting any opportunity of personal hearing to the petitioners.

2.11 The Court observed that the adjudication order was passed ex parte without hearing the petitioners, and this was directly contrary to the mandate of Section 75(4) and to the principles of natural justice.

Conclusions

2.12 Since the show-cause notice contemplated an adverse decision, the Proper Officer was under a statutory obligation under Section 75(4) to afford the petitioners an opportunity of hearing prior to passing the order under Section 73.

2.13 Failure to grant such hearing rendered the adjudication order violative of Section 75(4) and the principles of natural justice and therefore unsustainable.

Issue 3 - Consequential relief and directions

Interpretation and reasoning

2.14 The Court noted the combined effect of: (i) improper service of the show-cause notice and order by uploading under the "additional notices and orders" tab only; and (ii) absence of mandatory opportunity of hearing despite an adverse decision being contemplated.

2.15 Relying on the approach adopted in the coordinate Bench decision, the Court found no reason to depart from that view and considered it appropriate to set aside the impugned adjudication order while preserving the proceedings at the show-cause notice stage and granting a further opportunity to the petitioners.

Conclusions

2.16 The adjudication order dated April 24, 2024 was set aside on the dual grounds that it was neither appropriately served nor passed in accordance with Section 75(4) of the Act of 2017.

2.17 The petitioners were granted two weeks' time from the date of the order to file their reply to the show-cause notice dated December 19, 2023.

2.18 The adjudicating authority was directed to conclude the proceedings as early as possible, preferably within four weeks from the date of filing of the reply, without granting unnecessary adjournments.

2.19 No order as to costs was made.

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