Case Law Details
Avexa Corporation Private Limited Vs State of Andhra Pradesh and Others (Andhra Pradesh High Court)
Demand order passed is not valid when no proper time was granted to Assessee for collecting relevant document due to GST registration cancellation: Andhra Pradesh High Court
Summary: In the case of Avexa Corporation Pvt. Ltd. vs State of Andhra Pradesh (W.P. 10094/2024), the Andhra Pradesh High Court ruled that a GST demand order issued on January 24, 2024, was invalid due to the violation of principles of natural justice. The petitioner’s GST registration was canceled on October 31, 2023, and the restoration application was rejected. The petitioner filed an appeal, which was allowed on January 22, 2024, restoring the registration. However, while the appeal was pending, the tax department issued an intimation on October 10, 2023, and a show-cause notice (SCN) on December 26, 2023, demanding payment for discrepancies in returns from 2017 to 2023. The petitioner requested an extension to submit the required documents and a proper response, but the order was passed before the two-week extension was granted. The Court emphasized that administrative authorities must give adequate time to a person to gather material for their defense, and any violation of this principle renders the proceedings invalid. The petitioner was denied access to the necessary documents and the departmental website due to the cancellation of the registration. The Court observed that the impugned order was issued before the deadline for filing a response had passed and without granting adequate time for the petitioner to gather the required documents. Consequently, the Court set aside the impugned order and directed the authorities to provide sufficient time for the petitioner to respond, ensuring that the principles of natural justice are followed in future proceedings.
Introduction: The Hon’ble Andhra Pradesh High Court in the case Avexa Corporation (P.) Ltd. Vs State of Andhra Pradesh [W.P. 10094/2024 dated August 19, 2024] order passed is not valid when no proper time granted to Assessee for collecting relevant document due to GST registration cancellation as the demand order was passed just after the revocation of GST registration cancellation, for gathering of documents.
Facts:
Avexa Corporation (P.) Ltd (“the Petitioner”) the registration of the petitioner for which the Petitioner sought restoration of registration. The application for restoration was rejected against which the Petitioner filed an appeal which was allowed vide order dated January 22, 2024.
During the pendency of appeal, an intimation dated October 10, 2023 was issued under Section 61 of A.P. Goods & Services Tax Act, 2017 (“the APGST Act”) which called for the petitioner to either pay a certain amount or file a reply stating why the petitioner is not liable to pay the demanded amount based on certain discrepancies in return. Further, a fresh intimation was issued and based on the intimation, a Show cause notice (“the SCN”) was issued which based on the discrepancies in the return filed by the petitioner for which the Petitioner was asked to file the reply.
The petitioner submitted a letter interalia demanding for restoration of registration based on the order revoking registration and requested an extension of time for furnishing a proper reply.
However, the Revenue Department (“the Respondent”) passed an order dated January 24, 2024 (“the Impugned Order”) confirming the demand raised in the SCN. Aggrieved by the Impugned Order, the Petitioner filed an appeal on the ground that there is a violation of principles of natural justice.
Issue:
Whether order passed is valid when no proper time granted to Assessee for collecting relevant document due to GST registration cancellation?
Held:
The Hon’ble Andhra Pradesh High Court in the case of W.P. 10094/2024 held as under
- Observed that, “requirement of administrative authorities to follow the principles of natural justice is founded on the simple principle that the person on whom action is proposed, should be given the opportunity to set out his case against such proposed action. This would require that, the person against whom action is proposed is informed of the entire case against him and the material that is proposed to be used against him is also furnished to him. Thereafter, the affected person should be given adequate opportunity to make out his case against the proposed action. This would mean that the affected person should be given an opportunity to gather all the material that he proposes to use against the proposed action. Any variation or violation of this requirement would amount to violation of principles of natural justice, which would render the proposed proceedings invalid”.
- Noted that, the Impugned Order was passed before the expiry of time period of filing reply. Further, the Petitioner was entitled to gather the material required in his defence, for the Petitioner required access to the website which would have been possible after the revocation of registration.
- Further Noted that, no such opportunity was granted to the Petitioner as the appellate order passed the order of revocation of registration on January 22. 2024 and the Impugned Order was passed on January 24, 2024.
- Opined that, there is a violation of principles of natural justice making the Impugned Order invalid.
- Held that, the writ petition is allowed and the Impugned Order was set aside.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
Heard Sri B. Adinarayana Rao, learned Senior Counsel representing Sri Javvaji Sarath Chandra, learned counsel appearing for the petitioner and learned Government Pleader for Commercial Tax for respondents.
2. The petitioner, who was registered under the CGST and APGST Acts, was carrying on business within the State of Andhra Pradesh. The registration of the petitioner had been cancelled, by proceedings dated 28.10.2023, with effect from 31.08.2023. Initially, the petitioner sought revocation, of the cancellation of registration, by application dated 30.10.2023. This application for revocation was rejected, by order dated 24.11.2023. Subsequently, the petitioner filed an appeal against these proceedings, which came to be allowed on 22.01.2024.
3. While the proceedings for restoration of registration were pending, the 2nd respondent had issued an intimation under Section 61 of the A.P. Goods & Services Tax Act, 2017 (for short ‘the APGST Act’) dated 13.10.2023 calling upon the petitioner either to pay certain tax amount or to explain why such payment need not be made as there were various discrepancies found in the returns filed by the petitioner for the years 20172018 to 2022-2023. The petitioner responded to this intimation seeking time.
4. Subsequently, the 2nd respondent issued a fresh intimation dated 19.12.2023 under Section 74 of the APGST Act, pointing to a discrepancy of Rs.31,20,23,862/-. Thereafter, a show cause notice dated 26.12.2023 was issued by the 2nd respondent to the petitioner-company demanding an amount of Rs.32,51,66,267/-, on account of discrepancies in the returns filed by the petitioner or to explain, by filing written objections, within 30 days, why such amount should not be collected from the petitioner.
5. The 2nd respondent, in the same show cause notice dated 26.12.2023, had also requested the petitioner to choose a date for personal hearing out of three dates, viz., 04.01.2024 or 18.01.2024 or 24.01.2024.
6. The petitioner, after receipt of this show cause notice, had approached the 2nd respondent and submitted a letter, dated 22.01.2024, requesting the 2nd respondent to restore the registration of the petitioner, in view of the orders of the appellate authority setting aside the cancellation of registration and to grant time to the petitioner to log into the website of the tax department for the purpose of verification of details and for resetting the e-way bill password and for issuance of e-invoices. The petitioner requested two weeks time for filing a detailed reply, after being able to log into the website of the department.
7. The 2nd respondent passed an order dated 24.01.2024 confirming the demand raised in the show cause notice and the petitioner was called upon to pay the tax and penalty determined under the said order dated 24.01.2024.
8. The petitioner has approached this Court, by way of the present writ petition challenging the said order dated 24.01.2024 issued by the 2nd respondent primarily on the ground of violation of principles of natural justice.
9. Sri B. Adinarayana Rao, would submit that the impugned order, dated 24.01.2024, suffers from various infirmities. Firstly, the show cause notice, dated 26.12.2023, had granted 30 days time to the petitioner to respond. However, the impugned order has been passed 24.01.2024 even before the period of 30 days had elapsed. Secondly, the petitioner, by letter dated 22.01.2024, had sought time for responding to the show cause notice, dated 26.12.2023, and also for restoration of the registration of the petitioner. However, this letter, which is clearly not a submission of objections, has been treated as a response to the show cause notice. Thirdly, the presence of the authorized representatives at the office of the 2nd respondent, for submission of the letter dated 22.01.2024, has been treated as if the petitioner had availed the opportunity of personal hearing.
10. Sri B. Adinarayana Rao, learned Senior Counsel would also point out that the options given by the 2nd respondent are dated 04.01.2024, 18.01.2024 and 24.01.2024 whereas the personal hearing said to have been availed by the petitioner is on 22.01.2024, which is not in accord with the show cause notice of the 2nd respondent itself.
11. The learned Government Pleader for Commercial Tax would submit that the letter of the petitioner dated 22.01.2024 was in response to the earlier letter dated 13.01.2023. He would submit that the petitioner being fully aware of the show cause notice dated 26.12.2023 had chosen not to respond to the show cause notice and had responded only to an earlier proceedings. He would submit that the conduct of the petitioner in deliberately refusing to respond to the show cause notice dated 26.12.2023 disentitles the petitioner for any relief from this Court.
12. The requirement of administrative authorities to follow the principles of natural justice is founded on the simple principle that the person on whom action is proposed, should be given the opportunity to set out his case against such proposed action. This would require that, the person against whom action is proposed is informed of the entire case against him and the material that is proposed to be used against him is also furnished to him. Thereafter, the affected person should be given adequate opportunity to make out his case against the proposed action. This would mean that the affected person should be given an opportunity to gather all the material that he proposes to use against the proposed action. Any variation or violation of this requirement would amount to violation of principles of natural justice, which would render the proposed proceedings invalid.
13. In the present case, the notice was issued on 26.12.2023 granting 30 days time. The impugned assessment order has been passed even before the said period has been elapsed. The petitioner was entitled to gather all the material required for his defense. This would mean that the petitioner would have to be given access to the website of the department, after restoration of registration, with adequate time being given to the petitioner to gather all the details such as e-way bills, e-invoices, etc. In the present case, such an opportunity was not given to the petitioner as the appellate authority’s order, restoring registration, was passed on 22.01.2024 and the impugned order has been passed on 24.01.2024.
14. In the circumstances, this Court is of the opinion that there has been violation of principles of natural justice rendering the impugned order invalid.
15. Accordingly, this writ petition is allowed setting aside the impugned/penalty proceedings of the 2nd respondent bearing reference Nos.ZD370124015440Z (2017-20), ZD370124015404V (2018-19), ZD370124015419K (2019-20), ZD370124015424T (2020-21), ZD370124015431Y (2022-23)dated 24.01.2024 leaving it open to the 2nd respondent to undertake assessment proceedings for tax and penalty, on the basis of the show cause notice dated 26.12.2023. However, such proceedings would be taken up after giving adequate opportunity of hearing to the petitioner by way of granting two weeks time from today to the petitioner to file his objections to the show cause notice. Thereafter, a personal hearing will also be granted to the petitioner. Needless to say the order of assessment shall contain assessment of tax and penalty, if any, shall contain reasons. There shall be no order as to costs.
As a sequel, pending miscellaneous applications, if any, shall stand closed.
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