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Case Law Details

Case Name : Menacherry Lonappan Jayan Vs State Tax Officer (Kerala High Court)
Appeal Number : WA No. 2137 of 2023
Date of Judgement/Order : 22/12/2023
Related Assessment Year :
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Menacherry Lonappan Jayan Vs State Tax Officer (Kerala High Court)

Introduction: In a significant ruling, the Kerala High Court addressed the appeal of Menacherry Lonappan Jayan against the State Tax Officer’s order (Ext.P5), which proposed a GST demand without affording proper opportunity of hearing. The appellant contested the violation of natural justice, leading to the dismissal of the writ petition by the learned Single Judge and subsequent appellate challenge.

Detailed Analysis: Menacherry Lonappan Jayan, an assessee under the GST Act, had complied with filing returns and paying taxes for the assessment year 2017-18. The controversy arose when the State Tax Officer, through Ext.P1, proposed a substantial demand for tax and interest based on alleged non-payment of tax and excess input tax credit. In response to Ext.P1, the appellant submitted a reply.

Despite the appellant’s submission of a reply (Ext.P3) through the registered web portal, explicitly requesting an opportunity for a personal hearing, the State Tax Officer issued Ext.P5, a show-cause notice finalizing the demand under Section 73. The crux of the matter lies in the fact that Ext.P5 did not reference the appellant’s reply (Ext.P3) or grant the requested opportunity for a personal hearing. This procedural lapse led to a violation of the principles of natural justice.

The Kerala High Court, upon hearing the arguments from both sides, concluded that Ext.P5 cannot be sustained and is liable to be set aside. The court emphasized the importance of adhering to principles of natural justice in administrative proceedings, especially in matters of tax demands. The appeal was allowed, setting aside both the impugned judgment and Ext.P5.

The court directed the State Tax Officer (1st respondent) to reconsider the matter, taking into account the contentions raised by the appellant in Ext.P3 reply. Furthermore, the appellant is to be provided with a proper opportunity for a personal hearing before a fresh order is passed.

Conclusion: In conclusion, the Kerala High Court’s decision in Menacherry Lonappan Jayan vs State Tax Officer underscores the significance of procedural fairness in GST proceedings. The court’s intervention, quashing the GST demand, reaffirms the principle that administrative actions must adhere to natural justice. The directive for a fresh order with due consideration of the appellant’s contentions and a personal hearing ensures a fair and just resolution of the matter.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The appellant filed the writ petition before the learned Single Judge impugning Ext.P5 order passed by the 1st respondent, State Tax Officer. The learned Single Judge dismissed the writ petition relegating the appellant to alternative appellate remedy. It is challenging the said judgment; the appellant is before us.

2. We have heard Sri.Harisankar V.Menon, the learned counsel for the appellant, Sri.P.R.Sreejith, the learned standing counsel for respondents 1 and 2 and Sri.V.K.Shamsudheen, the learned Senior Government Pleader.

3. The appellant, an assessee under the GST Act on the rolls of the 1st respondent, had filed returns and paid tax thereon for the assessment year 2017-18. By Ext.P1, the 1st respondent proposed to demand tax along with interest on the alleged non payment of tax due of 77,204.88/- as in the GSTR-1 return and claim of excess input tax credit of 4,23,463/-. The appellant gave reply to Ext.P1. Thereafter, the 1st respondent issued Ext.P5 show cause notice demanding tax and interest under Section 73. The appellant uploaded Ext.P3 reply in Form GST DRC-06 along with necessary attachments through the registered web portal of GST Department. The appellant specifically requested for an opportunity of personal hearing. However, it appears that the 1st respondent issued Ext.P5 order finalising the demand without referring to Ext.P3 reply or granting the appellant an opportunity for personal hearing. Thus, the impugned order clearly violates the principles of natural justice. Hence, we are of the view that Ext.P5 cannot be sustained and it is liable to be set aside.

Accordingly, we allow the appeal setting aside the impugned judgment as well as Ext.P5. The 1st respondent is directed to pass fresh order after taking into account the contentions raised by the appellant in Ext.P3 reply and after giving him an opportunity of personal hearing.

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