Case Law Details
Mecel Construction Vs Assistant Commissioner (Calcutta High Court)
Calcutta High Court addressed a petition challenging the freezing of a taxpayer’s bank account due to non-response to a GST adjudication notice during the COVID-19 pandemic. The petitioner argued that the Show Cause Notice, issued on October 21, 2021, could not be responded to due to pandemic-related difficulties. Subsequently, an adjudication order was passed on January 24, 2023, which the petitioner claimed was not communicated. The petitioner only became aware of it when their bank account was frozen. Upon learning of the order, they filed an appeal with an application for condonation of delay and made the required pre-deposit of ₹6,64,190/-. However, the tax authorities neither responded to the appeal nor lifted the attachment on the bank account.
The High Court ruled that procedural fairness must be maintained and that statutory limitations should be interpreted liberally, especially in cases of genuine hardship. It referenced the case of K. Chakraborty & Sons Vs. Union of India, which upheld the applicability of Section 5 of the Limitation Act, 1963, in GST appeals. The court quashed the adjudication order and directed the Appellate Authority to consider the condonation application on its merits. If found justified, the appeal should be heard and decided within two months. This decision reinforces the principle that procedural technicalities should not unjustly hinder taxpayers from exercising their legal rights.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. The present writ petition has been filled by petitioner challenging the actions and orders passed by the respondent authorities concerning the freezing of their bank account and subsequent adjudication proceedings.
2. On 21st October 2021, during the COVID-19 pandemic, the respondent issued a Show Cause Notice to the petitioner. However, owing to the prevailing difficulties during the COVID period, the petitioner could not submit a timely response to the said notice.
3. Consequently, an Adjudication Order was passed on 24th January 2023 by the respondent authorities. The petitioner claims that this order was not initially communicated or served upon it.
4. The petitioner only became aware of the adjudication order when it encountered difficulties operating its bank account. Upon contacting the bank, it was revealed that the petitioner’s accounts had been frozen pursuant to the directions of the respondent department.
5. On becoming aware of the adjudication order, the petitioner submitted a representation dated 25th April 2024, recording its receipt of the order and raising its grievances.
6. Subsequently, the petitioner preferred an appeal against the adjudication order, accompanied by an Application for Condonation of Delay. Alongside the appeal, the petitioner deposited a pre-deposit amounting to ₹6,64,190/-, as required under the law. The respondent department was duly informed of the filing of the appeal and a formal prayer was made to refrain from taking any coercive action during the pendency of the proceedings.
7. The petitioner also submitted an application specifically seeking the withdrawal of the attachment order imposed on its bank accounts. Despite these representations, the respondents have not taken any steps to address the petitioner’s grievances or withdraw the attachment.
8. The petitioner, therefore, seeks intervention from this Hon’ble Court, as the freezing of their accounts has resulted in undue hardship and a violation of procedural fairness, despite the pendency of the appeal and compliance with statutory pre-deposit requirements. Therefore, the petitioner humbly prays for appropriate reliefs, including the withdrawal of the attachment order and directions to the respondents to refrain from any further coercive actions during the pendency of the appeal.
9. Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court allows the writ petition as statutory provisions on limitation should be interpreted liberally in cases where genuine hardships are demonstrated, particularly in light of judicial precedents supporting such relief.
10. In K. Chakraborty & Sons Vs. Union of India reported in [2024] 159 taxman.com 259 (Calcutta), the Hon’ble Division Bench comprising Justice Debangsu Basak and Justice Md. Shabbar Rashidi held that: –
“19. Section 107 of the Act of 2017 does not exclude the applicability of the Act of 1963 expressly. It does not exclude the applicability of the Act of 1963 impliedly also if one has to consider the provisions of Section 108 of the Act 2017 which provides for a power of revision to the designated authority, against an order of adjudication. In case of revision a far more enlarged period of time for the Revisional Authority to intervene has been prescribed. Two periods of limitations have been prescribed for two different authorities namely, the Appellate Authority and the Revisional Authority in respect of the same order of adjudication. Any interference with the order of adjudication either by the Appellate Authority or by the Revisional Authority would have an effect on the defaulter/notice. Section 107 does not have a non-obstante clause rendering Section 29(2) of the Act of 1963 non-applicable. In absence of specific exclusion of the Section 5 of the Act 1963 it would be improper to read an implied exclusion thereof. Moreover, Section 107 it its entirely has not expressly stated that, Section 5 of the Act of 1963 stands excluded.
20. Therefore, in our view, since provisions of Section 5 of the Act of 1963 have not been expressly or impliedly excluded by Section 107 of the Act of 2017 by virtue of Section 29(2) of the Act of 1963, Section 5 of the Act of 1963 stands attracted. The prescribed period of 30 days from the date of communication of the adjudication order and the discretionary period of 30 days thereafter, aggregating to 60 days is not final and that, in given facts and circumstances of a case, the period for filling the appeal can be extended by the Appellate Authority”.
11. In light of the procedural irregularities and the arbitrary nature of the actions, this court finds the petitioner’s case to be meritorious. Accordingly, the writ petition is allowed, and the appellate order is quashed. The petitioner’s rights under the GST Act, 2017 are restored, with all benefits that accompany this decision, without any adverse consequences arising from the annulled orders. The Appellate Authority is requested to consider and decide the application for condonation of delay filled by the petitioner on merits. If, the explanations advance for condonation of delay are accepted to be sufficient, the Appellate Authority may condone the delay in preferring the appeal, hear and dispose the appeal on merit. However, the above exercise has to be completed within two (02) months from date.
12. All pending applications are accordingly disposed of.
13. There shall be no order as to costs.
14. All parties shall act on the server copy of this order, duly downloaded from the official website of this Court.
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