Duty demand and attachment of bank account without opportunity of being heard unjustified: Madras HC

Tvl. Mohanasundaram Senthilvelu Vs State Tax Officer (Madras High Court)

Madras High Court held that impugned order confirming demand u/s. 73 of the CGST Act and issuing bank attachment notice set aside as order was passed without giving an opportunity of being heard. Accordingly, order held as passed in violation of principles of nature justice.

Facts- Vide the present petition, the petitioner alleges that the proceedings initiated u/s. 61 of the CGST Act, 2017, for the Financial Year 2018-2019, resulted in a Show Cause Notice (SCN) dated 22.12.2021, for excess Input Tax Credit (ITC) of Rs.4,82,703/- in both SGST and CGST.

A subsequent Demand Notice u/s. 73, issued on 28.02.2022, was followed by a Reminder Notice in November 2023, which contained an incorrect reference number. Despite the 1st respondent’s system-generated Order dropping the assessment on 2/7 28.04.2024, another Form GST ASMT-12 was issued on 15.08.2024, accepting the petitioner’s reply. Issuing a Bank Attachment Notice based on dropped proceedings is illegal and in violation of Section 75(6) of the CGST Act, as the respondent failed to properly set out the facts, making the proceedings contrary to natural justice and time-barred.

Conclusion- Held that the intimations and notices were uploaded in the ‘Additional Notices’ tab instead of the ‘Notices’ tab, and the petitioner, lacking computer knowledge, had entrusted this duty to a local tax consultant who, due to poor health, failed to notice the same. She further contends that the petitioner, having only discovered the notices belatedly, submitted a reply explaining that the mismatch was due to the supplier belatedly filing monthly returns, paying tax under B2C instead of B2B, which was verified through a letter from the supplier and copies of the monthly returns. However, the belated reply was not considered. Thus, the impugned order was passed without giving the Petitioner an opportunity to submit oral or written submissions, violating the principles of natural justice.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Mr. T. N. C. Kaushik, learned Additional Government Pleader (Taxes) takes notice for the respondents.

2. By consent, the writ petition is taken up for final disposal at the admission stage itself.

3. The learned counsel submits that the proceedings initiated under Section 61 of the CGST Act, 2017, for the Financial Year 2018-2019, resulted in a Show Cause Notice (SCN) dated 22.12.2021, for excess Input Tax Credit (ITC) of Rs.4,82,703/- in both SGST and CGST. A subsequent Demand Notice under Section 73, issued on 28.02.2022, was followed by a Reminder Notice in November 2023, which contained an incorrect reference number. Despite the 1st respondent’s system-generated Order dropping the assessment on 2/7 28.04.2024, another Form GST ASMT-12 was issued on 15.08.2024, accepting the petitioner’s reply. The learned counsel argues that issuing a Bank Attachment Notice based on dropped proceedings is illegal and in violation of Section 75(6) of the CGST Act, as the respondent failed to properly set out the facts, making the proceedings contrary to natural justice and time-barred.

4. The learned counsel would further submit that the intimations and notices were uploaded in the ‘Additional Notices’ tab instead of the ‘Notices’ tab, and the petitioner, lacking computer knowledge, had entrusted this duty to a local tax consultant who, due to poor health, failed to notice the same. She further contends that the petitioner, having only discovered the notices belatedly, submitted a reply explaining that the mismatch was due to the supplier belatedly filing monthly returns, paying tax under B2C instead of B2B, which was verified through a letter from the supplier and copies of the monthly returns. However, the belated reply was not considered. Thus, the impugned order was passed without giving the Petitioner an opportunity to submit oral or written submissions, violating the principles of natural justice. The learned counsel submits that the petitioner is now ready and willing to pay 10% of the demand made by the respondent if given an opportunity to file a reply/objections along with the necessary documents to substantiate their claim.

5. On the other hand, the learned Additional Government Pleader (Taxes) would submit that the respondents uploaded the notice for personal hearing in the GST Online Portal. But, the petitioner failed to avail the said opportunity. Yet, the learned Additional Government Pleader has no objection for granting relief to the petitioner, subject to certain terms.

6. Having regard to the admitted fact that the impugned orders came to be passed without hearing the petitioner in violation of the principles of natural justice, and also considering the submissions made by the learned counsel on either side, this court passes the following order:-

(i) The orders impugned herein are set aside and the matter is remanded to the first respondent for fresh consideration on condition that the petitioner shall pay a 10% of demand to the respondent(s) within a period of four weeks from the date of receipt of a copy of this order and the setting aside of the impugned orders will take effect from the date of payment of the said amount.

(ii) On such payment, the second respondent is directed to lift the attachment on the bank account of the petitioner with immediate effect.

(iii) The petitioner shall file their reply/objection along with the required documents, if any, within a period of two weeks thereafter.

(iv) On filing of such reply/objection by the petitioner, the respondent shall consider the same after issuing a 14 days clear notice by fixing the date of personal hearing and thereafter pass appropriate orders on merits and in accordance with law, as expeditiously as possible.

7. Accordingly, the writ petition is disposed of. There is no order as to costs. Consequently, the connected miscellaneous petition is closed.