GST Order Without Opportunity to Reply Violates Natural Justice: Madras HC

Sundarapandian Vs State Tax Officer (Madras High Court)

Order released without giving opportunity to reply is contrary to the principles of natural justice

The Hon’ble High Court of Madras in the case Sundarapandian v. State Tax Officer-1 [W.P. (MD) 17429/2024 dated July 29, 2024] held that an order released without giving proper opportunity to reply to the Show Cause Notice (“SCN”) is contrary to principles of natural justice.

Facts:

Sundarapandian (“the Petitioner”) were served notices vide FORM DRC-01A dated October 26, 2023 and FORM DRC-01 dated November 15, 2023, for the assessment year 2018-19, which was issued by the State Tax Officer (“the Respondent”). The notices were preceded by the Order dated February 12, 2024 (“the Impugned Order”).

The Petitioner contended that the Impugned Order was passed without issuance of the aforementioned notices, hence, it is gross violation of principles of natural justice.

The Respondent submitted that the notices that preceded Impugned Orders were posted on the GST common portal and the Petitioner ought to have participated in the said proceedings. Instead, the Petitioner has chosen to remain mute and has suffered the Impugned Order. It is further submitted that in any event the Petitioner is not without remedy, the Petitioner has an alternative remedy before the appellate authority under Section 107 of the CGST Act.

Hence, aggrieved by the Impugned Order, the present writ petition was filed by the Petitioner.

Issue:

Whether the issuing order without any opportunity to file reply against SCN?

Held:

The Hon’ble Madras High Court in W.P. (MD) 17429/2024 held as under

• Observed that, the Petitioner may have a case on merits as the dispute pertains to difference of turn over reported in FORM GSTR-7 and FORM GSTR-3B. Considering the same, the Impugned Order was set aside and remitted the case to the Respondent to pass fresh order on merits. The Impugned Order, passed for the Assessment Year 2018-19 which stands quashed hereby, shall be treated as addendum to the SCN. The Petitioner shall file a consolidated reply within a period of 30 days from the date of receipt of copy of the order and also deposit 20% of the disputed tax from electronic cash registered.

Our Comments:

In pari materia case, of Bhadrish Jayantilal Sheth v. Income Tax Officer [WPA 8232 of 2022 dated May 17, 2022] the Hon’ble Calcutta High Court held that not providing an opportunity to file a reply to the SCN is violation of principle of natural justice. Hence, the case was remanded back to the Assessing Officer for fresh assessment.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner is aggrieved by the impugned order, dated 12.02.2024 passed by the 1^st respondent for the assessment year 2018-19. The impugned order precedes notices in DRC-01A, dated 26.10.2023 and DRC-01, dated 15.11.2023.

2. Heard the learned counsels on either side and this writ petition is disposed at the time of admission after dispensing with counter.

3. The contention of the petitioner is that the impugned order has been passed without issuance of the aforesaid notices and therefore, there is a gross violation of principles of natural justice.

4. On the other hand, the learned Additional Government Pleader appearing for the respondents would submit that the notices that preceded impugned orders were posted in the GST common portal and the petitioner ought to have participated in the said proceedings. Instead, the petitioner has chosen to remain mute and has suffered the impugned order. It is further submitted that in any event the petitioner is not without remedy, the petitioner has an alternative remedy before the appellate authority under Section 107 of the GST Act.

5. Having considered the submissions made by the learned counsel for the petitioner and the learned Additional Government Pleader for the respondents, I am of the view that the petitioner may have a case on merits as the dispute pertains to difference of turn over reported in GSTR-7 and GSTR-3B. Considering the same, I am inclined to grant partial relief to the petitioner by setting aside the impugned order and remitting the case to the 1st respondent to pass fresh order on merits. The impugned order, dated 12.02.2024 passed for the assessment year 2018-19 which stands quashed hereby, shall be treated as addendum to the show cause notices in DRC-01A, dated 26.10.2023 and DRC-01, dated 15.11.2023. The petitioner shall file a consolidated reply within a period of thirty (30) days from the date of receipt of copy of this order and also deposit 20% of the disputed tax from electronic cash registered.

6. In view of the above, this Writ Petition is disposed of. No costs.

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