Three Hearing Dates Cannot Be Treated as Three Adjournments: Gujarat HC

Yadav Trailor Transport Co. Vs Union of India & Ors. (Gujarat High Court)

Gujarat High Court Quashes Tax Orders Because Three Hearing Dates Cannot Be Treated as Three Adjournments

The Gujarat High Court allowed a writ petition challenging an Order-in-Original dated 31.03.2023 and an Order-in-Appeal dated 25.06.2024 passed under the Finance Act, 1994. The petitioner, engaged in providing taxable services, contended that the show-cause notice issued by the department based on information received from the Income Tax Department and Form 26AS data was never served upon him. The petitioner further submitted that the Order-in-Original was also not received and that a copy of the order was provided only on 14.03.2024 after repeated representations. The petitioner filed an appeal on the very next day, i.e., 15.03.2024, but the appeal was dismissed on the ground of limitation.

The petitioner argued that the appellate authority failed to consider that there was no proof regarding the date of service of the Order-in-Original and that multiple contradictory dates existed regarding issuance and service. It was further submitted that paragraph 19 of the Order-in-Original referred to three hearing dates, namely 18.01.2023, 24.01.2023, and 30.01.2023, and these dates were wrongly treated as three adjournments under Section 33A(2) of the Finance Act, 1994.

Reliance was placed on the Gujarat High Court decision in Regent Overseas Pvt Ltd vs. Union of India, where it was held that grant of three adjournments would require four hearing dates, since the original hearing date and three adjournments are separate. The Court noted that treating three hearing dates as three adjournments was contrary to the statutory requirement and amounted to breach of principles of natural justice.

The respondent department submitted that communications had been sent through email on 14.09.2021, 22.09.2021, and 07.10.2021 seeking details from the petitioner and that, due to non-response, the show-cause notice was issued on 13.10.2021. Since no reply was received, the matter was adjudicated ex parte.

After considering the submissions, the High Court held that the Order-in-Original had been passed contrary to the settled legal position and in violation of principles of natural justice. The Court emphasized that the right to proper notice and adequate opportunity of hearing is a fundamental requirement and referred to the principle of audi alteram partem.

Accordingly, the High Court quashed both the Order-in-Original and the Order-in-Appeal and remanded the matter back to the adjudicating authority for fresh adjudication after granting adequate opportunity of hearing to the petitioner. The Court directed that the exercise be completed within 12 weeks and clarified that it had not examined the merits of the case.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. Heard learned Senior Advocate Mr. Mr.Devan Parikh appearing with learned advocate Mr.Anmol Purohit for the petitioner and learned advocate Mr.Param Shah for the respondent.

2. Rule returnable forthwith. Learned advocate Mr.Param Shah, waives service of notice of rule for and on behalf of the respondent.

3. Having regard to the controversy involved in this petition, with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing.

4. By way of the present petition under Article 226 of the Constitution of India, the writ petitioner prays to quash and set aside the Order-in-Original dated 31.03.2023 passed under the Finance Act, 1994 (hereinafter referred to as ‘the Act’ for short) as well as the Order-in-Appeal dated 25.06.2024 passed under the provisions of the Act.

5. The brief facts leading to filing of the present writ petition is that the petitioner is an individual engaged into activities of providing taxable services.

The Income Tax Department had provided data/details of the income to the Dy.Commissioner of GST, Morbi (hereinafter referred to as ‘the respondent’ for short), recording income of various persons who had declared taxable service in their Income Tax Returns and had also provided data in Form 26AS under the Income Tax Rules. In view of the same, a show-cause notice by the respondent calling for the details was issued on 13.02.2021.

5.1 It is the case of the petitioner that he had not received the show-cause notice, and therefore, he had specifically applied respondent for providing a copy of the show-cause notice. Despite the fact that the show-cause notice was not received by the petitioner, Order-in-Original dated 31.01.2023 came to be passed by the respondent. It is the case of the petitioner that the Order-in-Original was also not received by the petitioner. In view of the same, representations were made by the petitioner. The respondent provided copy of the Order-in-Original vide communication dated 14.03.2024. Having received the copy of the Order-in-Original passed by the Adjudicating Authority, the petitioner preferred an appeal on the next date i.e. 15.03.2024. In the meantime, the bank account of the petitioner came to be freezed by the authorities. Despite this fact, the respondent rejected the appeal preferred by the present petitioner on 25.06.2024 which is impugned in the present writ petition.

6. Mr.Devan Parikh, learned Senior Advocate appearing with Mr.Anmol Purohit learned advocate for the petitioner, submitted that the Order-in-Appeal is dismissed on the ground of limitation. However, the Appellate Authority has failed to consider the fact that the Order-in-Original was received by the petitioner from the department on 14.03.2024 and the appeal was filed on the very next date i.e. on 15.03.2024. There are multiple contrary dates of issuance and there is no proof of service by the department indicating the date on which the Order-in-Original was served to the petitioner. Therefore, in such a situation, the issue of limitation does not arise and the appeal could not have been dismissed on the ground of limitation.

6.1 It was further argued by learned Senior Counsel Mr.Devan Parikh that the Order-in-Original in para 19 specifically mentions three dates of hearing being granted to the petitioner for personal hearing. Reliance was placed on a decision in the case of Regent Overseas Pvt Ltd vs. Union of India & Ors., rendered in Special Civil Application No. 10563 of 2016. It was submitted by learned Senior Advocate Mr.Devan Parikh for the petitioner that as the main fulcrum of the controversy is in breach of principles of natural justice, he would refrain to submit anything further on merits if the matter is remanded back to the original authority.

7. Per Contra, learned advocate Mr.Param Shah for the respondent, was not in a position to dispute the factual aspect about the three dates being granted to the petitioner for hearing and the same being considered for adjournments.

7.1 It was submitted that the respondent had communicated to the petitioner on 14.09.2021, 22.09.2021 and 07.10.2021 by way of an E-mail to provide details with regard to the show-cause notice, however, no response was received from the petitioner, and therefore, the show-cause notice was issued on 13.10.2021. Since no reply was received by the respondent to the show-cause notice, the matter was adjudicated by the Adjudicating Authority and the Order-in-Original was passed on 31.01.2023.

8. In wake of such submissions, learned advocate Mr.Param Shah for the respondent has requested the Court to pass appropriate orders.

9. Having heard the learned advocates appearing for the respective parties and having perused the material on record, the issue involved is in a narrow compass. The petitioner has argued that looking to the record, more particularly para 9 of the Order-in-Original, it appears that three dates were scheduled for hearing i.e. 18.01.2023, 24.01.2023 and 30.01.2023 before the Adjudicating Authority. The issue, therefore, is whether these three dates were sufficient as contemplated under proviso to Sub-section(2) of Sec.33A of the Act.

9.1 It has been categorically observed by this Court in the case of Regent Overseas Pvt Ltd (supra), that when three dates had been granted, it would tantamount to adjournments. However, the provisions of Sub-section (2) of Sec.33A of the Act provides for three adjournments, therefore, that would amount to 4 days and 3 adjournments. For ready reference, the observations made by this Court in the case of Regent Overseas Pvt Ltd (supra), are reproduced:

“12. Another aspect of the matter is that by the notice for personal hearing three dates have been fixed and absence of the petitioners on those three dates apepars to have been considered as grant of three adjournments as contemplated under the proviso to sub-section (2) of section 33A of the Act. In this regard, it may be noted that sub-section (2) of section 33A of the Act provides for grant of not more than three adjournments, which would envisage four dates of personal hearing and not three dates, as mentioned in the notice for personal hearing. Therefore, even if by virtue of the dates stated in the notice for personal hearing it were assumed that adjournments were granted, it would amount to grant of two adjournments and not three adjournments, as grant of three adjournments would mean, in all four dates for personal hearing.

13. As discussed hereinabove, in view of the fact that the notice for personal hearing was not served upon the petitioners in accordance with law, no one could remain present for personal hearing on behalf of the petitioners on the dates specified in the notice and the adjudicating authority has proceeded on the footing that three adjournments have been granted and has passed the impugned ex parte order Such order is, therefore, clearly in breach of the principles of natural justice warranting interference by this court in exercise of powers under Article 226 of the Constitution of India.”

9.2 In wake of such submissions, the Order-in-Original is passed against the settled legal position and in breach of principles of natural justice.

9.3 It is not in dispute that the petitioner was not heard before passing of the Assessment Order. It is fundamental proposition of law that other side should be heard before any order is passed. The maxim of Audi Alteram Partem is broad enough to include the rule against bias since a fair hearing is must for it to be unbiased hearing. The essential ingredients of fair hearing is that a person should be served with a proper notice and should be given a right to hearing.

10. For the foregoing reasons, the impugned Order-in-Original dated 31.03.2023 passed under the Finance Act, 1994, as well as the Order-in-Appeal dated 25.06.2024 is hereby quashed and set aside and the matter is remanded back to the Adjudicating Authority to de novo hear the petition and decide the same in accordance with law after affording adequate opportunity of hearing to the petitioner. Such exercise shall be completed within a period of 12 weeks from the date of receipt of copy of this order.

It is clarified that this Court has not gone into merits of the matter.

Rule is made absolute to the aforesaid extent. No order as to costs.