Case Law Details
Dhanasekaran Thenmozhi Vs Deputy Commissioner (Madras High Court)
The case of Dhanasekaran Thenmozhi Vs Deputy Commissioner, heard by the Madras High Court, revolves around the petitioner’s contention that they were uninformed about GST proceedings due to their consultant’s failure to communicate effectively. This lack of communication led to an ex parte order against the petitioner, prompting legal intervention to challenge the order.
Detailed Analysis:
1. Grounds of Challenge: The petitioner argues that they were not afforded a fair opportunity to contest the service tax demand due to their consultant’s negligence in keeping them informed about the proceedings. This lack of communication resulted in the petitioner being blindsided by the ex parte order dated 23.09.2022.
2. Breach of Natural Justice: The petitioner’s counsel contends that the impugned order not only violates principles of natural justice but also overlooks the petitioner’s eligibility for a threshold exemption of Rs. 10,00,000/-. This raises significant concerns regarding procedural fairness and legal entitlements.
3. Remittance Offer: In a gesture towards resolution, the petitioner agrees to remit 20% of the disputed tax demand as a condition for remand, showcasing a willingness to engage constructively with the legal process.
4. Respondent’s Defense: On behalf of the respondent, it is argued that due process was followed, with show cause notices issued and multiple opportunities for personal hearings provided to the petitioner. The respondent contends that the petitioner’s lack of response to these notices negates any claim of procedural injustice.
5. Evaluation of Petitioner’s Claims: While the court acknowledges the petitioner’s reliance on a consultant for tax compliances, it finds the petitioner’s explanation for their unawareness of the proceedings somewhat lacking in credibility. However, it also notes the disparity between the scale of the petitioner’s business (a beauty parlour) and the confirmed tax demand, suggesting a possible disproportionality in the enforcement action taken.
Conclusion:
The Madras High Court, after careful consideration, quashes the impugned ex parte order and remands the matter for reconsideration. This decision is contingent upon the petitioner remitting 20% of the tax demand within two weeks and submitting a reply to the show cause notice within the same period. The court directs the respondent to afford the petitioner a fair opportunity, including a personal hearing, before issuing a fresh order within two months. With this, the writ petition is disposed of, emphasizing the importance of procedural fairness and equitable treatment in tax proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 23.09.2022 is assailed on the ground that the petitioner was not provided a reasonable opportunity to contest the service tax demand.
2. The petitioner states that she had engaged the services of a consultant to take care of service tax compliances. Since such consultant did not keep the petitioner informed about proceedings initiated against her, she states that she was unaware of such proceedings until she was informed about the exparte order dated 23.09.2022.
3. Learned counsel for the petitioner submits that the impugned order warrants interference not only because of breach of principles of natural justice, but also because the petitioner was eligible to claim the threshold exemption of Rs.10,00,000/-.
4. On instructions, learned counsel for the petitioner agrees to remit 20% of the disputed tax demand as a condition for remand.
5.Mr. Ramesh Kutty, learned senior standing counsel, accepts notice for the respondent. He points out that a show cause notice was issued to the petitioner on 21.10.2021. The petitioner did not reply thereto. He also points out that a personal hearing was granted on several dates in the year 2022 and that the petitioner did not respond to such notices for personal hearing. Therefore, he submits that no interference is called for.
6. The petitioner averred that the services of a consultant were availed of to handle service tax compliances and that she was unaware of proceedings culminating in the impugned order because she was not kept informed by such consultant. It also appears that the petitioner was running a beauty parlour. While the explanation of the petitioner is not totally convincing, it appears that the tax demand against a person carrying on business on a very small scale has been confirmed without such person having been heard.
7. For reasons set out above, the impugned order is quashed and the matter is remanded for reconsideration subject to the petitioner remitting 20% of the tax demand within a period of two weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit a reply to the show cause notice within the aforesaid period. Upon receipt of the petitioner’s reply and upon being satisfied that 20% of the tax demand was received, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within a period of two months from the date of receipt of the petitioner’s reply.
8. The writ petition is disposed of on the above terms. There will be no order as to costs. Consequently, connected miscellaneous petitions are closed.
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