Assessment Order invalid when Petitioner cannot reply due to GST Registration cancellation

Vadakkot Chackoo Devassy Vs Assistant State Tax Officer (Kerala High Court)

The Hon’ble Kerala High Court in the case of Vadakkot Chackoo Devassy vs. Assistant State Tax Officer [WP (C) No. 42265 of 2023 dated December 21, 2023] set aside the Assessment Order and remitted the matter back for reconsideration in case where the Assessee could not file the reply due to cancellation of GST Registration and issuance of show cause notice on the next day of notice in GST ASMT-10.

Facts:

Vadakkot Chackoo Devassy (“the Petitioner”) filed a writ petition against the Assessment Order dated November 3, 2023 (“the Impugned Order”) passed under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

The Petitioner contended that the Show Cause Notice (“the SCN”) was issued on the next day of issuance of Notice in Form GST ASMT-10 and no official copy of the aforesaid documents were provided to the Petitioner. Also, the Petitioner could not file reply as the Petitioner’s registration has been cancelled before issuance of the SCN.

Issue:

Whether Assessment Order is valid when Petitioner could not file reply due to cancellation of GST Registration?

Held:

The Hon’ble Kerala High Court in the case of WP (C) No. 42265 of 2023 held as under:

• Noted that, the Petitioner was not afforded any time for filing of reply to the notice in GST ASMT-10.
• Further Noted that, the Petitioner GST registration was cancelled before the said notices were uploaded in GST Portal.
• Opined that, in the present case there is a violation of principles of natural justice.
• Held that, the Impugned Order is set aside and the matter is remitted back for reconsideration.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The present writ petition has been filed seeking the following reliefs:

“i. issue a WRIT OF CERTIORARI or any other appropriate writ, order or direction under Article 226 of the Constitution of India, quashing Exhibit P5 order and P6 summary of order in Form GST DRC-07 passed by the 1st respondent as barred by limitation and against the principle of natural justice, or pass such further or other orders as may deem fit and proper in the circumstances of this case, and render justice;

ii. direct to invoke powers under section 172 of the CGST/SGST Act, 2017 to remove the difficulties faced by the taxable persons to avail input tax credit which was claimed through the returns filed belatedly without any specific time limit;

iii. to declare section 16(4) of the CGST/SGST Act, 2017 as ultravies to section 16(1) and 16(2) of the CGST Act as well as unconstitutional.”

2. Notice in Form GST ASMT-10 under Rule 99(1) of the Central Goods and Services Tax Rules, 2017/State Goods and Services Tax Rules, 2017 was issued to the petitioner on 29.9.2023 and on the very next day, a show cause notice under Section 73 of the CCentral Goods and Services Tax Act, 2017/State Goods and Services Tax Act, 2017 came to be issued. Learned counsel for the petitioner submits that no official copy of the notice either in GST ASMT-10 or the show cause notice dated 30.9.2023 under Section 73 was issued to the petitioner physically and the same were uploaded in the GST portal. Since the petitioner’s registration had been cancelled before issuance of the said notices, the petitioner did not file reply to the said show cause notices. Otherwise, the petitioner was not granted any time in the notice so issued in GST ASMT-10 and therefore, there has been violation of the principles of natural justice in passing the assessment order, Ext.P5.

3. Prima facie, I find some substance in the submission advanced by the learned counsel for the petitioner. Notice in Ext.P2 disclosed that it is dated 29.9.2023 and on the very next day, Ext.P3
notice under Section 73 was issued. The petitioner was not afforded any time for filing reply to the notice in GST ASMT-10.

4. It is also not in dispute that the petitioner’s GST registration was cancelled before the said notices were uploaded in the GST portal.

5. In view thereof, I find that there is violation of the principles of natural justice and, therefore, the impugned assessment order, Ext.P5, is unsustainable and the same is hereby set aside.
The matter is remanded back to the file of the assessing authority, 1st respondent, to pass fresh a order. The petitioner is permitted to file reply to the show notice dated 30.9.2023, Ext.P3, within a period of three (3) days from today. If the petitioner files reply as above, he shall be afforded an opportunity before finalising the fresh  assessment and order shall be passed as directed
above by the assessing authority. The petitioner assessee will not take any ground regarding the limitation in finalising the assessment for the assessment year 2017-18.

With the aforesaid observations and directions, the present writ petition stands finally disposed of. Pending interlocutory application, if any, in the present writ petition stands dismissed.

Conclusion: Consequently, the Hon’ble Kerala High Court set aside the Impugned Order and remitted the matter back for reconsideration. The court’s decision underscores the importance of upholding principles of natural justice in tax assessments. It highlights the need for procedural fairness, especially concerning the right to be heard and respond adequately to notices and allegations.

In conclusion, the case of Vadakkot Chackoo Devassy v. State of Kerala and Others serves as a reminder of the judiciary’s role in safeguarding procedural fairness in tax matters, ensuring that assessments are conducted justly and in accordance with the law.

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(Author can be reached at info@a2ztaxcorp.com)