Case Law Details
Prosign Communications Vs Deputy State Tax Officer II (Madras High Court)
The recent judgment by the Madras High Court in the case of Prosign Communications Vs Deputy State Tax Officer II has stirred discussions in the legal arena. The court’s decision to set aside GST assessment orders for the assessment periods 2017-18 and 2018-19 has significant implications, particularly regarding the principles of natural justice.
The crux of the matter lies in the alleged breach of natural justice principles, specifically concerning the denial of a personal hearing to the petitioner, Prosign Communications. Despite responding to the show cause notice issued in October 2023, the petitioner was not afforded a personal hearing before the issuance of the impugned orders.
Section 75(4) of the applicable GST enactments mandates that a personal hearing should be granted either upon request or when an adverse order is proposed against the taxpayer. The court’s scrutiny revealed a clear contravention of this statutory provision, compelling the intervention to set aside the impugned orders.
The learned counsel for the petitioner emphasized the importance of adhering to procedural fairness, arguing that the absence of a personal hearing deprived the petitioner of the opportunity to present their case effectively. Conversely, the Additional Government Pleader contended that the initiation of proceedings followed due process, citing compliance with principles of natural justice.
However, upon meticulous examination of the case documents, the court concluded that the failure to provide a personal hearing after the petitioner’s response amounted to a violation of statutory requirements. Consequently, the court exercised its authority to annul the assessment orders and remand the matters for reconsideration, directing the respondent to afford a reasonable opportunity, including a personal hearing, to the petitioner.
Furthermore, the court’s decision extended to nullifying the recovery notice associated with the impugned orders, emphasizing that the subsequent appellate proceedings were also affected. Notably, the stay of recovery, backed by the pre-deposit made in accordance with Section 107 of applicable GST enactments, remains in force during the appellate phase.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In these writ petitions, assessment orders pertaining to the assessment periods 2017-18 and 2018-19 are challenged on the ground of breach of principles of natural justice.
2. Upon receipt of show cause notice in October 2023, the petitioner replied on 18.01.2024. The impugned orders were issued thereafter.
3. Learned counsel for the petitioner assails these orders on the ground that there was contravention of sub-section (4) of Section 75 of applicable GST enactments by failing to provide a personal hearing after such reply was issued by the petitioner.
4. Mr. C. Harsha Raj, learned Additional Government Pleader, accepts notice on behalf of the respondents. He pointed out that proceedings were initiated against the petitioner pursuant to an audit and that principles of natural justice were complied with.
5. On perusal of the documents on record, it is clear that the petitioner responded to the show cause notice. After receipt of such reply, the respondent did not offer a personal hearing to the petitioner. Subsection (4) of Section 75 of applicable GST enactments prescribes that a personal hearing should be offered either if requested for or if an order adverse to the tax payer is proposed to be issued. Since such statutory prescription was contravened in this case, the impugned orders call for interference.
6. Therefore, the orders impugned herein are set aside and the matters are remanded for reconsideration by the respondent. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue fresh orders within two months from the date of receipt of a copy of this order.
7. In view of the fact that the assessment orders preceding the impugned recovery notice were set aside, the recovery notice does not survive and the same is set aside. It should be noticed that this recovery notice pertains not only to orders impugned herein but also to the orders which form the subject of pending appellate proceedings. Since pre-deposit was made in accordance with Section 107 of applicable GST enactments, stay of recovery is in force in relation to the appellate proceedings also.
8. W.P.Nos.9610, 9619, 9620 & 9627 of 2024 are disposed of on the above terms without any order as to costs. Consequently, the connected miscellaneous petitions are also closed.
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