Tax demand raised beyond show-cause notice and using undisclosed adverse material-order set aside, fresh hearing ordered under Article 226.

The dominant issue was whether the adjudication order suffered from jurisdictional error and breach of natural justice by travelling beyond the show cause notice and relying on adverse material without confrontation. The HC held that an adjudicating authority cannot confirm a demand in excess of what is proposed in the show cause notice, and that failure to supply adverse material and afford an effective opportunity of reply/hearing violates audi alteram partem, justifying interference under Article 226 despite availability of an appeal. Consequently, the impugned order, which enhanced the proposed demand substantially, was interfered with and the matter was directed to be reconsidered after supplying the material, granting one month for objections and fixing a personal hearing with 15 days' notice. Petition disposed of.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the adjudication order suffered from a jurisdictional error by confirming/creating a demand far in excess of the demand proposed in the show cause notice.

(ii) Whether the adjudication order was vitiated for violation of rules of natural justice, including non-confrontation of adverse material, non-supply of relied upon documents, and lack of due opportunity of hearing.

(iii) Whether, given the above defects, the Court should exercise writ jurisdiction to set aside the adjudication order and prescribe a fresh adjudication process rather than relegating the petitioner to the appellate remedy.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Adjudication beyond the show cause notice (jurisdictional error)

Interpretation and reasoning: The Court treated adjudication beyond the scope of the show cause notice as a jurisdictional infirmity. It noted that the show cause notice proposed a disputed demand of tax and penalty of Rs. 1,71,79,347.92, whereas the adjudication order determined demand at Rs. 9,42,21,714.94, which was "far and excess of the demand pressed to be confirmed".

Conclusion: The Court found that a jurisdictional error "may have crept in" because the adjudication created a demand greatly exceeding the proposed demand, rendering the order unsustainable.

Issue (ii): Violation of natural justice (non-confrontation of adverse material; lack of hearing; laconic order)

Interpretation and reasoning: The Court accepted that adverse material was not confronted and that effective opportunity of hearing remained to be provided. It also found the impugned adjudication order to be "wholly laconic", reinforcing the conclusion that the process was unfair. The Court emphasized that where adverse material is used, the affected party must be enabled to object after being supplied the material and given an opportunity of hearing.

Conclusion: On account of the uncontroverted lack of opportunity and non-confrontation of adverse material, the adjudication order was set aside.

Issue (iii): Maintainability of writ despite availability of appeal; appropriate relief and remand directions

Interpretation and reasoning: The Court held that where a jurisdictional error or violation of natural justice exists, relegating the petitioner to the appellate authority would serve no useful purpose, and the petitioner remains entitled to seek extraordinary jurisdiction under Article 226. Given the defects found, the Court chose to quash the order and structure a fresh, time-bound opportunity-based adjudication process.

Conclusion: The Court disposed of the writ by setting aside the adjudication order and directing: (a) issuance of further notice in continuation of the original show cause notice within two weeks, annexing copies of all relied upon documents; (b) one month for filing detailed reply/objections; (c) personal hearing with 15 days' advance notice; and (d) expeditious conclusion of proceedings preferably within four months from issuance of the further notice, with petitioner's cooperation recorded.

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