Vulcan Metallurgical Works Vs Joint Commissioner of Commercial Taxes (Appeals) & Anr. (Karnataka High Court)
Summary: The Karnataka High Court, in Vulcan Metallurgical Works Vs Joint Commissioner of Commercial Taxes (Appeals) & Anr., examined whether a GST assessment order imposing tax and penalty could be sustained when the taxpayer was not granted a personal hearing. The petitioner, a registered partnership firm engaged in trading and manufacturing ferrous and non-ferrous materials and equipment, challenged the assessment order dated 29.06.2019 and the appellate order dated 04.08.2020. Following an inspection of its business premises on 26.09.2018, the tax authorities examined its books of account, issued a notice and passed an order under Sections 74 and 122(2)(b) of the CGST and KGST Acts. The petitioner’s appeal under Section 107(11) of the KGST Act was dismissed, following which the name of the tax authority was entered in the City Survey records concerning the petitioner’s property.
During the writ proceedings, the petitioner sought deletion of the second respondent’s name from the CTS records. The State Government informed the Court that the Assistant Commissioner of Commercial Taxes had already communicated with the Assistant Director of Land Records, City Survey, Belagavi, for deletion of the entry. Taking the submission on record, the High Court directed deletion of the second respondent’s name from the records relating to CTS No. 1495 and allowed I.A. No. 2/2024.
On the substantive challenge, the petitioner argued that the assessment order violated the principles of natural justice and Section 75(4) of the GST Act because no personal hearing had been granted before the adverse decision. The High Court held that Section 75(4) requires the department to provide an opportunity of personal hearing whenever an adverse decision is contemplated against a person liable to tax or penalty. This obligation applies even when the taxpayer has not expressly requested a hearing. Since the department had failed to provide such an opportunity, the assessment order was contrary to the statutory requirement and could not be sustained.
Accordingly, the High Court quashed both the assessment order dated 29.06.2019 and the appellate order dated 04.08.2020. It directed the second respondent to provide the petitioner with an opportunity of personal hearing, consider all its contentions and pass an appropriate order in accordance with law within four weeks from the date of hearing. The writ petition was allowed. The ruling reiterates that personal hearing is mandatory before an adverse GST adjudication order, irrespective of whether the taxpayer specifically requests it.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Sri.Sangram S.Kulkarni., learned counsel for the petitioner and Sri.Shivaprabhu S.Hiremath., learned AGA for the respondents have appeared in person.
Counsel for the petitioner submits that an application in I.A.No.2/2024 is filed for deletion of the name of the second respondent appearing in the CTS records. Counsel, therefore, submits that an appropriate order may be passed.
Learned AGA submits that a memo has been filed stating that the Assistant Commissioner of Commercial Taxes (Enforecement-1) Belagavi has given an intimation to the ADLR, City Survey Belagavi to delete the name of the second respondent from the CTS records. Learned AGA, therefore, submits that a memo may be placed on record and an appropriate order may be passed.
Submission is noted. The memo is placed on record.
Upon receipt of the communication from Assistant Commissioner of Commercial Taxes (Enforecement-1) Belagavi the ADLR, City Survey Belagavi is directed to delete the name of the second respondent in the CTS records of CTS No.1495.
Accordingly, I.A.No.2/2024 is allowed.
2. The short facts are these:
The petitioner is a registered partnership firm incorporated on 01.01.2016 for carrying on the business of purchase, sales, and investments into all types of manufacturing and sales of ferrous and non-ferrous material trading in ferrous and non-ferrous material and manufacture, sales and servicing of equipment and machinery. From 01.07.2017, the GST was introduced by the Central and the State Governments. The petitioner got registered under the GST Act and a registration certificate was also issued to the petitioner on 28.11.2017. The petitioner has its registered office at Sy.No.29, Plot No.2A, BK Kangrali Industrial Area, Belagavi. The second respondent inspected the premises of the petitioner on 26.09.2018. On verification of the books of accounts maintained by the petitioner, the second respondent issued a show notice to the petitioner and proceeded to pass an order on 29.06.2019 under Section 74 and Section 122(2)(b) of the CGST and KGST Act. Aggrieved by the order, the petitioner preferred an appeal under Section 107(11) of the KGST Act before the first respondent. The first respondent vide order dated 04.08.2020 dismissed the appeal. Thereafter, the authority concerned made the entry showing the name of the second respondent in the CTS records. Hence, the petitioner has filed the writ petition on several grounds as set out in the Memorandum of Writ Petition.
3. Learned counsel for the respective parties urged several contentions. Heard, the contentions urged on behalf of respective parties and perused the Writ papers with utmost care.
4. The principal ground on which this Court is asked to quash the order dated 29.06.2019 is that it is opposed to the principles of natural justice and the petitioner was not heard as contemplated under Section 75(4) of the GST Act.
From a plain reading of Section 75(4), it is noticeably clear that even in a case where a person is chargeable with tax or penalty and has not requested a personal hearing, the Department is bound to give a personal hearing when an adverse decision is contemplated against such a person. In the present case, such an exercise has not been made by the Department concerned. In the circumstances, the second respondent was bound to give a personal hearing to the petitioner before passing an order on 29.06.2019. This would be irrespective of the fact as to whether the petitioner has asked for such a personal hearing or not. The order has been passed without giving any personal hearing to the petitioner and the same violates principles of natural justice and ex-facie contrary to the provisions of Section 75(4) of the CGST Act. Therefore, the orders at Annexures-C and F are liable to be quashed and accordingly, they are quashed.
5. The Writ of Certiorari is ordered. The order passed by the second respondent dated 29.06.2019 vide Annexure-C and the order dated:04.08.2020 passed by the first respondent in Appeal No.JCCT/AP/BGV/GST-25 of 2019/20/B-264 vide Annexure-F are quashed. Because of the quashing of orders at Annexure-C and F, the second respondent shall give an opportunity of a personal hearing to the petitioner; after considering all the contentions of the petitioner, shall pass an appropriate order following the law, within four weeks from the date on which a personal hearing is given to the petitioner.
6. Resultantly, the Writ Petition is allowed.
