Case Law Details
Manjeet Cotton Pvt. Ltd. Vs Commissioner of State Tax (Gujarat High Court)
Condoned the delay in period of limitation for filing the appeal by the assessee
The Hon’ble Gujarat High Court in the matter of M/s. Manjeet Cotton Pvt. Ltd. v. Commissioner of State Tax [R/Special Civil Application No. 16857 of 2022 dated December 15, 2022] condoned the delay of period of limitation to file appeal before the Appellate Authority by the assessee. Held that, assessee has the right to challenge the assessment order by appealing to the Appellate Authority, and such right should be exercised to maintain the possibility of addressing a larger issue.
Facts:
M/s. Manjeet Cotton Pvt. Ltd. (“the Petitioner”) is involved in the business of trading of cotton bales, cotton yarn, cottonseed oil cake, etc.
A Show Cause Notice (“SCN”) under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) along with summary thereof in Form GST DRC – 01 dated January 13, 2022 was issued by the Revenue Department (“the Respondent”) in which it was alleged that the Petitioner had received certain nil rated or exempted supplies, but had not reversed the Input Tax Credit (“ITC”) related to the said supply and a demand of INR 36,15,696/- with an interest of 24%p.a. was made.
The Petitioner submitted a reply in Form GST DRC – 06 requesting the Respondent to grant adjournment of 30 days to submit a detailed reply. However, the Respondent granted adjournment of 15 days, to which the Petitioner failed to reply.
Subsequently, search Proceedings under Section 67(2) of the CGST Act was carried out at the registered premise of the Petitioner on February 17, 2022 and summons were issued and on February 19, 2022 the Petitioner’s statement was recorded. The Petitioner reversed the ITC accounting to INR 1,19,149/- along with the interest pertaining to the year 2017-18 to 2020-21.
The Respondent in the month of June, 2022, debited the Electronic Credit Ledger (“ECL”) of the Petitioner against the demand raised vide its Order dated February 21, 2022 (“the Impugned Order”) and Notice under Section 79(1)(c) of the CGST Act was also issued and the manager of the bank was asked to pay the amount of INR 13,74,981/- on behalf of the Petitioner, against which the manager froze all debit transactions from the bank account of the Petitioner.
The petitioner was of view that the issue was resolved as the Petitioner had reversed the tax along with the interest and penalty. However, the Petitioner received a communication from its bank on June 21, 2022, indicating that the demand had been raised electronically and the bank was asked to adjust it.
Being aggrieved, this petition has been filed.
Issue:
Whether the Petitioner be allowed to appeal before the Appellate Authority even when it was beyond the period of appeal?
Held:
The Hon’ble Gujarat High Court in R/Special Civil Application No. 16857 of 2022 held as under:
- Noted that, the Petitioner neither submitted the reply nor did the Petitioner appear in person before the Respondent or followed in the matter.
- Stated that, it is only in the month of June, the Petitioner woke up from its slumber or may be it was a limited understanding of the act, which had resulted into not pursuing the matter before such period by the Petitioner.
- Further observed that, the officer concerned cannot be held responsible as it had already granted the opportunity of hearing to the Petitioner, which the Petitioner did not avail and hence, the officer cannot be blamed.
- Held that, the Petitioner is desirous of going to the Appellate Authority for questioning and challenging the Impugned Order, and this being the Petitioner’s right should be exercised to keep the larger issue open.
- Condoned the period of limitation and allowed the Petitioner to challenge the Impugned Order before the Appellate Authority within 2 weeks.
- Directed the Appellate Authority to decide the appeal on merits and in accordance with law after providing opportunity of hearing to the Petitioner.
- Further stated that, the Petitioner would be entitled to seek recredit of the amount credited from its bank account, barring the amount of pre-deposit which shall be decided by the Respondent.
- Further directed that, there shall be no further coercive recovery and Petitioner shall be entitled to operate its bank account, till the matter is decided.
Relevant Provisions:
Section 107 of the CGST Act:
“107. Appeals to Appellate Authority.–
(1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.
(2) The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceedings in which an adjudicating authority has passed any decision or order under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order and may, by order, direct any officer subordinate to him to apply to the Appellate Authority within six months from the date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified by the Commissioner in his order.
(3) Where, in pursuance of an order under sub-section (2), the authorised officer makes an application to the Appellate Authority, such application shall be dealt with by the Appellate Authority as if it were an appeal made against the decision or order of the adjudicating authority and such authorised officer were an appellant and the provisions of this Act relating to appeals shall apply to such application.
(4) The Appellate Authority may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months or six months, as the case may be, allow it to be presented within a further period of one month.
(5) Every appeal under this section shall be in such form and shall be verified in such manner as may be prescribed.
(6) No appeal shall be filed under sub-section (1), unless the appellant has paid-
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order subject to a maximum of twenty-five crore rupees, in relation to which the appeal has been filed.
Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of the penalty has been paid by the appellant.
(7) Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed.
(8) The Appellate Authority shall give an opportunity to the appellant of being heard.
(9) The Appellate Authority may, if sufficient cause is shown at any stage of hearing of an appeal, grant time to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:
Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.
(10) The Appellate Authority may, at the time of hearing of an appeal, allow an appellant to add any ground of appeal not specified in the grounds of appeal, if it is satisfied that the omission of that ground from the grounds of appeal was not wilful or unreasonable.
(11) The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against but shall not refer the case back to the adjudicating authority that passed the said decision or order:
Provided that an order enhancing any fee or penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund or input tax credit shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order:
Provided further that where the Appellate Authority is of the opinion that any tax has not been paid or short-paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised, no order requiring the appellant to pay such tax or input tax credit shall be passed unless the appellant is given notice to show cause against the proposed order and the order is passed within the time limit specified under section 73 or section 74.
(12) The order of the Appellate Authority disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for such decision.
(13) The Appellate Authority shall, where it is possible to do so, hear and decide every appeal within a period of one year from the date on which it is filed:
Provided that where the issuance of order is stayed by an order of a court or Tribunal, the period of such stay shall be excluded in computing the period of one year.
(14) On disposal of the appeal, the Appellate Authority shall communicate the order passed by it to the appellant, respondent and to the adjudicating authority.
(15) A copy of the order passed by the Appellate Authority shall also be sent to the jurisdictional Commissioner or the authority designated by him in this behalf and the jurisdictional Commissioner of State tax or Commissioner of Union Territory Tax or an authority designated by him in this behalf.
(16) Every order passed under this section shall, subject to the provisions of section 108 or section 113 or section 117 or section 118 be final and binding on the parties.”
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Issue Notice, returnable forthwith. Learned AGP waives service of notice for and on behalf of the respondent-State.
2. Petitioner is before this Court under Article 226 of the Constitution of India seeking to challenge the action of the respondent authority on the ground that the same is violative of principle of natural justice.
3. According to the petitioner, who is having his principal place of business at Ahmedabad and having GST Registration being engaged in the business of trading of Cotton Bales, Cotton Yarn, Cotton Seed Oil Cake, etc. received a show cause notice under Section 73 of the Central Goods and Service Tax/Gujarat Goods and Service Tax Act (‘the CGST Act’ and GGST Act’ hereinafter) along with summary thereof in the Form GST DRC-01 on 13.01.2022 issued by the respondent No.3.
3.1 It was alleged that the petitioner was supplied nil rated or exempted supply, but he had not reversed the ITC related to the said exempt supply as per Section 17(2) of the CGST Act read with Rule 42 of the Central Goods and Service Tax Rules, 2017 and Gujarat Goods and Service Tax Rules, 2017 (‘the CGST/GGST Rules’ hereinafter). The demand was made of Rs.36,15,696/- with interest at the rate of 24%p.a.
3.2 The petitioner submitted a reply on 26.01.2022 in Form GST DRC-06 wherein he requested to grant the adjournment of 30 days to submit a detailed reply in response to the show cause notice.
3.3 The adjournment was granted by the respondent No.3 of 15 days and asked the petitioner to reply on or before 11.02.2022. The petitioner could not file the reply in response to the said show cause notice. According to him, because on account of last date to file GST return in Form GSTR-1 for the month of January 2022, he was handicapped.
3.4 The search proceedings under Section 67(2) of the CGST Act at the registered premise of the petitioner took place on 17.02.2022, the summons had been issued and on 19.02.2022, the petitioner’s statement had been recorded. On 21.02.2022, the petitioner reversed the ITC accounting to Rs.1,19,149/- along with the interest pertaining to the year 2017-18 to 2020-21.
3.5 The petitioner thought that the issue was resolved as the officer of the GGST has issued show cause notice and another officer of the said department initiated the search proceedings as he had reversed the tax along with the interest and penalty. According to him, it is only in the month of June, when the recovery had come and the respondent had debited the electronic credit ledger against the demand raised vide its order dated 21.02.2022, he came to know of this. Notice was also issued under Section 79(1)(c) of the CGST Act, the Manager of the Bank was asked to pay the amount of Rs.13,74,981/- on behalf of the petitioner. He freezed the debit transactions from the Bank account. The petitioner, therefore, is before this Court seeking the following reliefs:
“23.
(a) To issue writ of or in the nature of a mandamus or any other appropriate writ, order or direction quashing and setting aside the order u/s.73 of the CGST Act issued by the respondent No.3 with a direction to adjudicate the matter afresh after providing an opportunity of hearing;
or Alternatively
To issue writ of or in the nature of a mandamus or any other appropriate writ, order or direction directing the respondent No.6 to admit the appeal and hear the same on merits and pass the judicious order in stipulated time.
(b) To issue writ of or in the nature of a mandamus or any other appropriate writ, order or direction directing the respondent to re-credit the amount recovered illegally from Electronic Credit Ledger of the petitioner;
(c) To issue writ of or in the nature of a mandamus or any other appropriate writ, order or direction directing the respondent No.5 to inform the Banks to remove the lien over the amount of the petitioner and let the petitioner operate its Bank account;
(d) to issue order(s),direction(s), writ(s) or any other relief(s) as this Hon’ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;
(e) to award Costs of and incidental to this application be paid by the Respondents.”
4. We have heard the learned advocate, Mr.Avinash Poddar appearing for the petitioner and learned AGP, Mr.Trupesh Kathiriya.
5. Learned advocate, Mr.Avinash Poddar has not disputed the fact that the request is made for 30 days for filing the reply on 26.01.2022 on the part of the petitioner. He also has agreed that 11.02.2022 was the date granted to him, however, he has not filed his reply nor had he appeared and no adjournment thereafter had been asked for. He does not dispute also the subsequent chronological events which had taken place. He heavily relied on the decision of this Court rendered in Special Civil Application No.11332 of 2022 with Special Civil Application No.11335 of 2022 (Annexure R) were on 23.06.2022 analyzing the provision of Section 75 (4) of the CGST Act, the Court has held that the opportunity of hearing has to be provided under the said provision where a request is received in writing from the person chargeable with the tax and penalty or where an adverse decision is contemplated against the person.
5.1 He has also urged that even without any request on the part of the party, when any adverse decision is contemplated, the personal hearing is a must as has been directed by this Court, which is missing in the instant case.
6. Learned AGP, Mr. Trupesh Kathiriya has urged that the portal itself is indicative of the fact that the adjournment was granted on 11.02.2022 and also the personal hearing was granted. However, he has neither filed his reply on 11.02.2022 nor has he appeared. That had thereafter led the officer concerned to pass the order on 21.02.2022 and that too, after the search was conducted on 17.02.2022. He has urged that there was a sufficient compliance of the directions. This was not the case where the officer concerned had not availed the opportunity of hearing. The party concerned did not avail it and hence, the officer cannot be blamed.
7. Having thus heard the learned advocates on both the sides and also having considered the material on the record, this Court notices that this is not the case where the Court would like to employ the ratio laid down in case of Graziano Transmission India Private Limited vs. State of Gujarat in Special Civil Application No.11332 of 2022. As the facts were completely different and here as can be noticed, his request for adjournment had been acceded to not for 30 days, but for 15 days. The online portal also is indicative of the fact that it was for both adjournment and the personal hearing, however, on 11.02.2022 admittedly, neither the response was given in writing nor had the petitioner appeared in person. He also never bothered thereafter to know as to what had happened on 11.02.2022.
8. It is also a matter of record that search was conducted at the official premise on 17.02.2022 and consequent upon the said search not only the petitioner, but some other employees were also called by the officer concerned for recording the statement and eventually on 21.02.2022, the order came to be passed which is impugned. He has reversed credit as has been detailed in the petition and that according to him was the reason for him to believe that everything was over till he received the communication from the Bank on 21.06.2022 where electronically the demand had been raised and the Bank was asked to adjust his demand.
8.1 Even if, there was a search and there were consequent actions initiated against the petitioner, he could not have been naive enough not to be bothered about the show cause notice which was issued against him and for which, he had already asked for the adjournment, as every such action would be requiring the logical conclusion. However, it is only in the month of June, he woke up from his slumber or may be it was a limited understanding of the act which had resulted into his not pursuing the matter before that. However, for that the officer concerned cannot be held responsible, who already had availed him an opportunity of hearing.
9. Be that as it may, for present, the petitioner is desirous of going to the Appellate Authority for questioning and challenging the assessment which has been finalized and that being his right, if he has missed out on the limitation, condoning this period of limitation in the given circumstance, keeping the larger issue open, this petition is allowed.
10. Resultantly, the impugned order passed by the respondent No.3 under Section 73 of the CGST Act is permitted to be challenged by the petitioner before the Respondent No.6 to where the petitioner shall approach within two weeks of the receipt of a copy of this order, which shall without being guided by any of the findings or observations decide the appeal expeditiously on its own merit, after providing due opportunity to the petitioner in accordance with law. As the amount is already credited from the Bank account of the petitioner, he would be entitled to seek recredit, barring the amount of pre-deposit which shall be decided by the authority concerned including of the grant of further stay. Till the same is decided, there shall be no further coercive recovery and petitioner shall be entitled to operate the Bank account.
11. Over and above the regular mode of service, direct service of order through e-mode on official email address is also permitted.
*****
(Author can be reached at info@a2ztaxcorp.com)
Author Bio
