TaxTMI 
TaxTMI 
2019 (10) TMI 864
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....nd if the beneficiary cannot be identified, to deposit it in a welfare fund. The Authority is empowered to levy penalty on the registered person and take further deterrent measures. One such order passed by the Authority against the Petitioner is the subject of challenge in this Petition. 3. The Petitioner No1-Hardcastle Restaurants is a private limited company. The Petitioner no.2 is the director. For convenience, they are referred in singular. Petitioner operates quick-service restaurants under the brand name McDonald's in Western and Southern India. The Petitioner serves around 2320 types of food and beverages items from its restaurants. The Petitioner is registered under the Goods and Services Tax Act, 2017 in ten States. After the commencement of GST Act till 14 November 2017, the services rendered by the Petitioner were subjected to 18% of GST. A notification was issued on 14 November 2017 reducing the rate of GST to 5% with effect from 15 November 2017. As a result, the Petitioner had to charge GST at 5% on the services rendered without availing impugned tax credit of the taxes paid on input, input services and capital goods. 4. Some customers of the Petitioner mad....
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....ioner questioned the jurisdiction of the Director-General, and also the bar of limitation for instituting the proceedings. The Petitioner contended that the reduction in the tax was neutralized due to withdrawal of input tax credit. The Petitioner stated that the commensurate benefit from the reduction was passed on to the customers. Contentions were raised regarding the implications of the Section 171 of the GST Act. The Petitioner sought to demonstrate as to how, due to the increase in the prices of raw materials, the prices had to be increased, and there is no profiteering. The Petitioner also contended that there was no methodology laid down to determine profiteering. The Director-General, through his representation, justified the report and the conclusions regarding the profiteering made by the Petitioner. 7. The Authority did not accept the contentions of the Petitioner. The Authority inter-alia held that the Section 171 of the Central GST Act was applicable since there was a reduction in the rate of tax from 5% to 18%. The contention of the Petitioner that there was no methodology was negatived holding that the Authority framed its methodology. It held that only because t....
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....Petitioner contends that since the hearing was only by three members and the impugned order is by four members, it is in breach of principles of natural justice. The Petitioner was not afforded an opportunity to present its case before Mr. Amand Shah, the fourth signatory. The Petitioner further contends that the Rules provides that if the difference of opinion occurs, the opinion of the majority is to be considered and, if equality of votes occurs, the Chairman has the casting vote, which implies internal deliberation amongst the members. It is submitted that the impugned order, in as much as relates to Mr. Amand Shah, is passed based on hearsay, and therefore, deserves to be set aside in totality as it is not separable. The Petitioner contends that the proceedings are beyond the jurisdiction of the Authority since the complaints were filed regarding one product, a type of coffee, and could not have been extended all the goods and services of the Petitioners. According to the Petitioner that the Authority has taken such a view in case of other entities. It is contended that sufficient evidence was not available in respect of all the products taken up for scrutiny. The Petitioner f....
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....fter hearings were completed and has signed the order. According to the Petitioners Mr. Amand Shah being party to the ultimate decision when he had joined after the hearing was concluded is against the basic notions of fairness and in breach of principles of natural justice. According to the Respondents, there is no requirement of oral hearing and the case can be decided on documents. The Respondents contend that oral hearing is not contemplated and signing the order by the fourth member is a mere irregularity. Thus, the stand is that there is no breach of principles of natural justice, and even assuming there is a breach, no prejudice is caused to the Petitioner, and the breach is a mere irregularity. 15. The concept of natural justice will vary with the nature of theenquiry and the object of the proceedings and consequences that ensue from the order passed. A bare reading of the statutory scheme reproduced below will show that the proceedings before the Authority are quasi-judicial, oral hearing is contemplated and orders entail civil consequences. We have underlined the relevant portions of the Rules and the Procedure to emphasis this point. 16. The Anti Profiteering Autho....
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.... are or have been Commissioners of State tax or central tax for at least one year or have held an equivalent post under the existing law, to be nominated by the Council." (c) Rule 122 lays down that it will consist of a Chairman and four Technical Members. ..... ..... ..... ..... ..... ..... ..... ....." The constitution of Standing Committee and Screening Committee is provided for under Rule 123, which reads as under :- "(1) The Council may constitute a Standing Committee on Anti-profiteering which shall consist of such officers of the State Government and Central Government as may be nominated by it. (2) A State level Screening Committee shall be constituted in each State by the State Governments which shall consist of- (a) one officer of the State Government, to be nominated by the Commissioner, and (b) one officer of the Central Government, to be nominated by the Chief Commissioner. ..... ..... ..... ..... ..... ..... ..... ....." The manner of appointment, payment of salary, allowances and other terms and conditions of the service is provided under the Rule 124. Rule 126 states that the Authority may determin....
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....h for reasons to be recorded in writing as may be allowed by the Authority, in such form and manner as may be specified by it, from an interested party or from a Commissioner or any other person, examine the accuracy and adequacy of the evidence provided in the application to determine whether there is prima-facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has not been passed on to the recipient by way of commensurate reduction in prices. (2) All applications from interested parties on issues of local nature or those forwarded by the Standing Committee shall first be examined by the State level Screening Committee and the Screening Committee shall, within two months from the date of receipt of a written application, or within such extended period not exceeding a further period of one month for reasons to be recorded in writing as may be allowed by the Authority, upon being satisfied that the supplier has contravened the provisions of section 171, forward the application with its recommendations to the Standing Committee for further action." The Stan....
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....eduction has been passed on to the recipient. For this purpose, the Director General is empowered to issue notices to the interested parties. The Director General is also empowered to issue notices to any such person who will aid and assist the enquiry. The Director General is to complete the investigation within a period of three months from receiving reference or such extended period not exceeding further period of three months for reasons recorded in writing upon completion of the investigation and furnish a report to the Authority. 19. Rule 132 empowers the Director General and the Authority to summon persons to give evidence and produce documents. The Director General is deemed a civil court for this purpose and the proceedings are judicial proceedings. The Rule reads thus: "(1) The Authority, Director General of Antiprofiteering, or an officer authorised by him in this behalf, shall be deemed to be the proper officer to exercise the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing under section 70 and shall have power in any inquiry in the same manner, as provided in the case of ....
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....nd constituted under section 57 of the Goods and Services Tax Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable; (d) imposition of penalty as specified under the Act; and (e) cancellation of registration under the Act. Explanation: For the purpose of this sub-rule, the expression, "concerned State" means the State or Union Territory in respect of which the Authority passes an order. (4) If the report of the Director General of Antiprofiteering referred to in sub-rule (6) of rule 129 recommends that there is contravention or even non-contravention of the provisions of section 171 or these rules, but the Authority is of the opinion that further investigation or inquiry is called for in the matter, it may, for reasons to be recorded in writing, refer the matter to the Director General of Anti-profiteering to cause further investigation or inquiry in accordance with the provisions of the Act and these rules. (5) (a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Anti-profiteering referred to in sub-rule (6) of....
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....rding opportunity of being heard to the concerned interested party. Clause 6 of the methodology states that in the discharge of its functions the Authority shall be guided by the principles of natural justice. It further states that no order, whether interim or final shall be passed, without affording opportunity of being heard to the concerned interested party. There can be no better evidence than this to indicate that principles of natural justice apply to the proceedings of the Authority. Clause 7 relied upon by the Respondents reads as under :- (7) No act or proceedings of the Authority shall be invalid merely on the ground that there was a vacancy or any defect in the constitution or appointments made in the Authority or there was any irregularity in the procedure followed by the Authority not affecting merits of the case. Clause 7 states that no act or proceedings of the Authority shall be invalid merely on the ground that there was any irregularity in the procedure followed by the Authority unless it affects the merits of the case. But the clause 7 has to be read along with clause 6 which incorporates principles of natural justice and cannot be read in isolati....
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....rt the proceedings have been initiated shall file or address the arguments first and shall also supply copies of such arguments to the other interested parties who shall be entitled to file their arguments, copies of which shall be supplied to the opposite interested parties, who shall be entitled to rebut the same. Again in clause 25 oral hearing is referred to. Clauses 20 to 30 regulate the procedure of hearing before the Authority such as adjournments, additional oral or documentary evidence, etc. The Authority is entitled to correct any clerical, arithmetical or factual mistake apparent from the record within three months from passing the order. These are generally the provisions which regulate function of a quasi-judicial authority. Clauses 31 to 35 deal with the communication of the order and disposal of record. Clause 41 states that civil court will have no jurisdiction regarding the matters pending before the Authority, conferring an exclusive jurisdiction. 22. To summarize the scheme in the context of the challenge. Consumers can lodge a complaint of profiteering by the registered persons to the authorities empowered to investigate in the complaints. An detailed enqu....
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....o v APSRTC AIR 1959 SC 308 = 1958 (11) TMI 28 - SUPREME COURT. The Court held that the divided responsibility of hearing and decision making destroys the concept of a judicial hearing. Such a procedure defeats the object of personal hearing. Personal hearing enables an authority to clear-up its doubts during the arguments, and the party can persuade the authority by reasoned argument to accept the viewpoint. The Court ruled that if one person hears and another decides, then personal hearing becomes an empty formality. The Division Bench of Delhi High Court in the case of M/s. Kwality Restaurant and Ice-Cream Co. v/s. The Commissioner of VAT, Trade and Tax Department and Ors. (2012) SCC OnLine Del 4993 = 2012 (9) TMI 853 - DELHI HIGH COURT extended this principle to the VAT tribunal. 25. In the case of Punjab University, Chandigarh vs. Vijay Singh Lamba and Ors. (1976) 3 SCC 344 = 1976 (4) TMI 219 - SUPREME COURT, relied by the Respondents, the Supreme Court was considering a case wherein the High Court of Punjab had set aside a decision on the ground of composition and attendance by one of the members. Here the committee was a Standing Committee established to look into the cond....
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....ber not part of the Authority earlier. 26. In the case of State of Madhya Pradesh & Ors. v Mahendra Gupta & Ors. [(2018) 3 MLJ 618 = 2018 (2) TMI 1920 - SUPREME COURT], relied upon by the Respondents, the petitioners before the High Court were permit holders of a route for transportation. Another permit holder had applied for modification of the schedule for movement of his vehicle, which was allowed. The petitioners challenged this decision and one of the contentions that were raised that the Transport Authority which was of three members, had heard the matter. However, the order was passed by two members. The Madhya Pradesh High Court held that this could not have been done and the decision of the Authority was set aside. The State of Madhya Pradesh filed an appeal against the decision of the High Court in the Supreme Court. The Supreme Court considered the Motor Vehicle Act and the Rules and the Constitution of the Regional Transport Authority. The Supreme Court noted the fact that the third member was transferred and was not available to be part of the order issued. The Supreme Court examined the facts of the case and found that when the hearing took place, the quorum was co....
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....h as the one was before the Supreme Court in the above case. In the present case, the decision is by a designated quasi-judicial body. 28. The above analysis of the decisions cited by the parties will show that the breach of principles of natural justice are examined in the facts of the case. Certain basic positions of law however are settled. The rule that one who hears must pass the order remains as the basic proposition. In certain circumstances, this rule can be deviated from. None of the decisions relied upon by the Respondents fit the fact situation at hand to justify that deviation. We had adjourned the hearing to enable the Counsel for the Respondents to cite before us any decision where in identical facts courts have permitted the infraction of the basic rule. The Counsel for the Respondents has also fairly accepted that the decisions cited by him can be distinguished on facts, but sought to contend that these decisions lay down certain principles which we must follow. These, according to Respondents, are where an oral hearing is not contemplated; there is no prejudice; is a case of mere irregularity, the court should not interfere. These propositions cannot be accepted....