Case Law Details
SS Enterprises Vs Office of Commissioner Central Tax Delhi West And Anr (Delhi High Court)
In a significant ruling that underscores adherence to statutory appeal mechanisms, the Delhi High Court has directed SS Enterprises to file an appeal against a penalty of Rs. 36,05,299/- imposed by the Additional Commissioner of Central Tax, CGST Delhi West Commissionerate. The High Court, hearing a petition filed under Articles 226 and 227 of the Constitution of India, declined to intervene directly at this stage, emphasizing that the impugned order is appealable under Section 107 of the Central Goods and Service Tax (CGST) Act, 2017.
The case centers on allegations against SS Enterprises for purportedly receiving “goods-less invoices” from two firms, M/s. Shivaay Trading and Satyam Associates, both reportedly linked to an individual named Ms. Aaarti Kapoor. The total Input Tax Credit (ITC) allegedly availed through these “fake and fraudulent firms” and “goods-less invoices” is a substantial Rs. 172 Crores.
Disputed Hearing Notice and Procedural Compliance
A key contention raised by SS Enterprises, the petitioner, was the alleged non-receipt of the personal hearing notice. However, a closer examination of the petitioner’s own averments in the writ petition contradicted this claim. The petition itself stated that the notice for personal hearing, dated January 9, 2025, was dispatched on January 17, 2025, and received by the petitioner on the evening of January 18, 2025. While the petitioner contended that the first two hearing dates (January 13 and January 16, 2025) had already lapsed, the notice was admittedly received in time for the final scheduled hearing on January 21, 2025.
The petitioner’s counsel further argued that the company was not afforded three personal hearings. The High Court, however, clarified the interpretation of Section 75(5) of the CGST Act. This provision states: “The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing: Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.”
The Court, in its order, elucidated that Section 75(5) does not mandate that three hearings must be provided. Instead, it merely sets a maximum limit of three adjournments. Since the personal hearing notice was received by the petitioner and they did not avail of the opportunity to appear for the hearing on January 21, 2025, the Court determined that the petitioner could not legitimately raise a grievance against the department on this count.
Reliance on Statutory Appeal Mechanism
Mr. Aakarsh Srivastava, Senior Standing Counsel for the respondents (tax department), highlighted that the impugned order was an appealable order. The High Court concurred with this submission. This aligns with a fundamental principle of administrative law, where courts generally prefer that parties exhaust alternative remedies, such as statutory appeals, before seeking judicial review through writ petitions. This principle is often applied to ensure that specialized tribunals and appellate authorities, with their expertise in specific statutory frameworks, have the initial opportunity to address grievances.
Judicial Precedents on Exhaustion of Remedies
While not explicitly cited in this specific order, the High Court’s direction to file an appeal is consistent with a long line of judicial precedents emphasizing the exhaustion of alternative remedies. The Supreme Court of India, in various judgments, including State of Uttar Pradesh v. Mohammad Nooh (1958 AIR 86) and Titagarh Paper Mills Ltd. v. State of Orissa (AIR 1983 SC 603), has consistently held that extraordinary jurisdiction under Articles 226 and 227 should ordinarily not be invoked when an effective alternative statutory remedy is available. The rationale behind this is to prevent parallel proceedings, ensure the proper functioning of statutory bodies, and allow for factual and legal issues to be first adjudicated by expert bodies. Exceptions to this rule typically include cases where there is a complete lack of jurisdiction, a violation of natural justice, or a challenge to the vires of a statute, none of which were conclusively established by the petitioner at this preliminary stage in the Delhi High Court.
Ensuring Fair Play: Provision of Relied Upon Documents
Despite directing the petitioner to pursue the appellate route, the High Court did address a significant procedural concern raised by SS Enterprises: the grievance that the “Relied-upon documents (RUDs)” were not provided to them. Recognizing the importance of a fair hearing, particularly at the appellate stage, the Court issued a specific directive to the tax department. The department has been ordered to make available all the RUDs to the petitioner within two weeks, to be sent to the email address: shivani@mpaca.in.
This direction is crucial for ensuring that the petitioner has a full and fair opportunity to present its case before the Appellate Authority. The provision of RUDs is an essential component of natural justice, allowing the aggrieved party to understand the basis of the allegations and effectively prepare their defense.
Timelines and Adjudication on Merits
To facilitate the appeal process, the High Court has granted SS Enterprises 30 days from the date of receiving the RUDs to approach the Appellate Authority. Importantly, the Court has stipulated that if the appeal is filed within this specified timeframe, it “shall not be dismissed on the ground of limitation and shall be adjudicated on merits.” This ensures that the time taken for the High Court proceedings and the delay in receiving the RUDs do not prejudice the petitioner’s right to have their appeal heard substantively.
Conclusion
In disposing of the petition, the Delhi High Court has reaffirmed the principle of exhausting statutory remedies while simultaneously ensuring that procedural fairness is maintained. By directing the provision of RUDs and waiving the limitation period for filing the appeal, the Court has provided SS Enterprises with the necessary tools and opportunity to present its case comprehensively before the Appellate Authority. The outcome of this appeal will now depend on the factual and legal arguments presented by both parties before the CGST Appellate Authority.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This hearing has been done through hybrid mode.
2. Allowed, subject to all just exceptions. Application is disposed of.
3. The present petition has been filed by the Petitioner – SS Enterprises under Articles 226 and 227 of the Constitution of India, inter alia, assailing the Order-in-Original bearing no. 84/SPP/ADC/CGST/DSC/2024-25 dated 31st January, 2025 (hereinafter, ‘impugned order’) passed by the Respondent No.1 – Additional Commissioner of Central Tax, CGST Delhi West Commissionerate.
4. Vide the impugned order, a penalty to the tune of Rs. 36,05,299/- has been imposed upon the Petitioner.
5. The case of the Petitioner is that the hearing notice was not received by the Petitioner. Moreover, the Petitioner submits that it is not connected to Ms. Aaarti Kapoor.
6. A perusal of the impugned order would show that the Petitioner is alleged to have received the goods-less invoices from two firms, namely M/s. Shivaay Trading and Satyam Associates, which are firms stated to be belonging to Ms. Aaarti Kapoor. The total availment of Input Tax Credit (hereinafter, ‘ITC’) is alleged to be to the tune of Rs. 172 Crores through fake and fraudulent firms and goods-less invoices.
7. The allegation that the personal hearing notice was not received is belied by the Petitioner’s own averment in the writ petition, which reads as under:
“Because the notice for personal hearing was not properly issued and failed to adhere to the due process of law. The notice for personal hearing dated 09.01.2025, was dispatched on 17.01.2025 and was received by the Petitioner only on 18.01.2025, late in the evening. By the time the notice was received, the time granted for first two personal hearings i.e 13.01.2025 and 16.01.2025 had lapsed, leaving the Petitioner with only one final hearing date i.e. 21.01.2025, available for representation. This procedural lapse in serving the personal hearing notice to the Petitioner deprived the Petitioner’s ability to defend itself and deprived it of a fair and reasonable opportunity to present its case, thus rendering the entire process leading to issuance ofImpugned Order as unfair.”
8. As per the above averment, the notice was in fact received, well in time for appearance in the personal hearing on 21st January 2025. Further submission on behalf of Ms. Shivani Sethi, ld. Counsel appearing for the Petitioner is that three personal hearings have not been given to the Petitioner. In fact, a perusal of Section 75(5) of the Central Goods and Service Tax Act, 2017 (hereinafter, ‘CGST Act’) would show that the said provision merely contemplates that the maximum adjournments shall be given for three times but does not in effect mean that three hearings have to be given. The relevant provision is set out below:
“(5) The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing:
Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.”
9. The personal hearing notice having been received by the Petitioner and the Petitioner having not availed of the hearing, cannot now be permitted to raise a grievance in respect thereof, against the Department.
10. Mr. Aakarsh Srivastava, ld. Sr. Standing Counsel for the Respondents submits that the impugned order is an appealable order.
11. Accordingly, let the Petitioner file an appeal in respect of impugned order under Section 107 of the CGST Act to the Appellate Authority.
12. With the appeal, the Petitioner is permitted to file any documents that they wish to place on record.
13. There is grievance that the Relied-upon documents (`RUDs’) are not with the Petitioner. It is accordingly directed that the Department shall make available to the Petitioner all the Relied Upon documents (hereinafter, ‘RUDs’) within two weeks on the following email address:-
Email ID : shivani@mpaca.in
14. Upon receiving the RUDs, the Petitioner is permitted to approach the Appellate Authority within 30 days. If the appeal is filed in the time period as specified above, the same shall not be dismissed on the ground of limitation and shall be adjudicated on merits.
15. The petition is disposed of in these terms. Pending application(s), if any, also stand disposed of.
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