Case Law Details
Hotel Rudra & Anr. Vs Deputy Commissioner (Calcutta High Court)
The Calcutta High Court has intervened in a dispute concerning an ex parte order demanding Goods and Services Tax (GST) based on a discrepancy in turnover, directing the tax authorities to provide the petitioner, Hotel Rudra, a fair opportunity to present its case. The ruling, in the case of Hotel Rudra & Anr. Vs. Deputy Commissioner, emphasizes adherence to the principles of natural justice in tax adjudication.
The writ petition was filed by Hotel Rudra, a partnership firm registered under the West Bengal Goods & Services Tax Act, 2017, challenging an order dated September 28, 2021, passed by the Joint Commissioner, State Tax, Baharampur Circle. The core of the dispute revolved around a significant enhancement of the firm’s taxable turnover.
According to the petitioners, their business primarily involved room rent services, with a reported turnover of Rs. 19,33,516/- for the period from April 2019 to February 2020. However, during an inspection, search, and seizure operation conducted by the respondent authorities for the periods spanning 2017-18 to 2019-20, discrepancies were identified. An intimation in Form GST DRC-01A, dated September 18, 2020, pointed out differences between the turnover declared in GST returns and that found in seized documents.
This intimation led to the determination of a provisional turnover of Rs. 48,03,871/- for the April 2019 to February 2020 period. This enhanced turnover was then subjected to varying GST rates (5%, 18%, and 28%) on alleged supplies of food, hukka, and banquet services – categories the petitioners contend they do not primarily deal in, asserting their business is mainly room rent.
Subsequently, on October 7, 2020, the respondent authorities issued a show-cause notice in Form GST DRC-01. This notice presented a further revised turnover figure of Rs. 70,03,871/-, significantly higher than the amount indicated in the earlier DRC-01A. Based on this, a tax liability of Rs. 6,75,599/- was assessed, along with an equal sum as penalty and applicable interest.
A final order was then passed on December 15, 2020, assessing a total tax liability of Rs. 4,92,597.36, an equal penalty, and interest of Rs. 1,71,081/-, culminating in a total demand of Rs. 10,30,277/-. Dissatisfied with this final order, Hotel Rudra filed an appeal before the appellate authority, the respondent No. 2. However, this appeal was disposed of ex parte, meaning without the petitioners’ presence or full consideration of their arguments, by an order dated September 28, 2021, which became the subject of the current challenge before the High Court.
The petitioners’ primary contention before the Calcutta High Court was a request to remand the matter back to the concerned authority for proper adjudication, citing that the appeal had been dismissed ex parte. They argued that a fair opportunity to present their case was not provided.
Conversely, the learned counsel for the respondents argued that the petitioners had been given “ample opportunities” to appear before the authorities but had failed to do so and had also neglected to communicate any reasons for their non-appearance.
After hearing both parties and reviewing the available records, the High Court concluded that since the matter was disposed of ex parte without considering the merits of the case, and “for the sake of interest of justice and equity,” the matter should be remanded for proper adjudication. The Court underscored that the “principles of natural justice warrants that a party should have a fair opportunity to present his or her case.”
Consequently, the High Court directed the respondent No. 2, the appellate authority, to fix a new date for hearing. This hearing must be preceded by a proper notice served to the petitioner, and a reasoned order must be passed after affording the petitioner an opportunity of being heard. The entire process, from fixing the hearing to passing the reasoned order, is to be completed within eight weeks from the date of communication of the High Court’s order. The Court also stipulated that the order should be communicated via the approved/prescribed portal. A clear warning was issued that if the petitioner fails to appear on the fixed date, the matter would be heard ex parte without further adjournments.
While the judgment does not explicitly cite specific judicial precedents, the Court’s reliance on “principles of natural justice” is a well-established legal doctrine that mandates fairness, impartiality, and the right to be heard in administrative and judicial proceedings. This ruling serves as a reminder to tax authorities of the necessity to provide adequate opportunities for taxpayers to present their defense, even in cases where initial non-compliance is perceived.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. The instant writ petition has been filed challenging the order dated 28.09.2021 passed by the Joint Commissioner, State Tax, Baharampur Circle.
2. The writ petitioner no.1 is a partnership firm carrying on business under the trade name of M/s. Hotel Rudra, and is duly registered with the GST Authority under the West Bengal Goods & Services Tax Act, 2017. The issue involved in the instant case pertains to enhancement of taxable turnover from Rs.19,33,516/- (Rs.63,92,969-Rs.44,59,453) to Rs.70,03,871/- during the period from April, 2019 to February, 2020, segregating the enhanced turnover under several heads namely; Food of Rs.30,26,256/- Hukka of Rs.9,43,155/- and Banquet of Rs.8,34,460/-whereas the petitioners have only room rent service of Rs.19,33,516/- on which tax is payable.
3. The inspection, search and seizure for the period from 2017-18 to 2019-20 was initiated by the respondent no.1. During the pendency of such proceeding and intimation in Form GST DRC-01A vide Memo No.792/BI-SB dated 18.09.2020 were issued, wherein a difference in turnover in GST returns and the seized documents were pointed out. As a result of which, the turnover for the relevant period from April, 2019 to February, 2020 was determined at Rs.48,03,871/- and was subjected to tax @ 5%, 18% and 28% on the alleged supply of food, hukka and banquet service respectively.
4. Subsequently, the respondent no.1 issued a show-cause notice on 07.10.2020 in Form GST DRC-01 wherein a turnover being different from the earlier GST DRC-01A was determined at Rs.70,03,871/- assessing the tax liability to the tune of Rs.6,75,599/- and the penalty of equal sum along with applicable interest. Consequent thereto a final order was passed vide 15.12.2020 assessing the total tax liability of Rs.4,92,597.36 with penalty of equal sum together with interest of Rs.1,71,081/- being the total demand of Rs.10,30,277/-.
5. Against the final order dated 15.12.2020, the writ petitioners filed an appeal before the appellate authority being the respondent No. 2 herein, who disposed of the matter ex parte by an Order dated 28.09.2021 which is the subject matter of challenge in the instant case.
6. The petitioner submits that the matter be remanded back to the concerned authority for proper adjudication since the matter was disposed of ex parte.
7. Per contra, the Learned Counsel for the respondents strenuously argued that the petitioners were already given ample opportunities to appear before the authority concerned but they remained absent and also failed and or neglected to submit any kind of communication to the Department concerned for explaining the reasons for such nonappearance.
8. Having heard the parties and upon considering the materials available on record, I am of the view that since the matter has been disposed of ex parte without considering the merits of the case, and for the sake of interest of justice and equity the matter should be remanded back to the authority concerned for proper adjudication of the same. The principles of natural justice warrants that a party should have a fair opportunity to present his or her case. Hence, the respondent No. 2 is directed to fix a date of hearing peremptorily upon service of notice of hearing to the petitioner and pass a reasoned order after affording an opportunity of hearing within a period of 8 weeks from the date of communication of the said order. The order shall be communicated accordingly in the approved/prescribed portal mentioned in the statute. It is made clear that the petitioner shall appear on the date fixed for hearing failing which the matter shall be heard ex parte and no further adjournment shall be granted to the petitioner. The entire exercise is to be completed within the stipulated period framed above.
9. Accordingly, the writ petition is disposed of.
10. However, there shall be no order as to costs.
11. Urgent Photostat certified copy of this order if applied for, be supplied to the parties upon compliance of all necessary formalities.
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