For a hearing to be fair, whole-hearted attention, alertness ad active application of the mind of the decision maker is indispensable. Constant attention to Pleadings, Arguments, Evidence and material documents is difficult to give, but that is what is expected of a person dispensing justice. The contention of the litigating parties may be adequate, arguments exhaustive and evidence substantial; yet, without active consideration of all there by the person concerned, hearing would be unfair and futile. Non-application of mind is, therefore, fatal to fair hearing. Non-application of mind not just makes the decision “Ultra-Vires” but also the decision becomes “mala-fide”.

So what does this means and how Assessee can take benefit of this term?

WHAT DOES THE WORD “NON-APPLICATION OF MIND” MEANS?

We all must have heard that “X” order or “Y” order has been quashed by the Higher Courts as they were issued without application of the mind but what constitutes “non-application” of mind?

A hearing is required to set the “law in motion” or to exercise a power conferred by law on an authority. Many Statutes empower an administrative authority to exercise discretionary power in public interest and use the expression viz. “as consider necessary” before taking of the decision. This connotes that there should be active application of mind, that is, a fair hearing of the matter.

So, what constitutes non-application of mind?

  • Power exercised without satisfaction of requirements of law
  • Power exercised without satisfaction of conditions of law
  • Non-consideration of Public Interest
  • Order disregarding Statutory requirement
  • Non-consideration of relevant evidence
  • Opinion formed without considering relevant materials
  • Decision based on no-material on record
  • Decision based on Speculation
  • Non-placement of relevant record
  • Lack of consideration of vital issues affecting right of parties
  • Delay in exercise of discretionary power
  • Order passed in Urgency or Haste

CASES WHERE ORDER OF OFFICER HAS BEEN REJECTED BY HIGHER COURTS BECAUSE OF “NON-APPLICATION OF MIND”

There are various cases in GST where Officers have passed the Order either without satisfaction of requirements of law or without considering / ignoring relevant evidence / material on records. Thus, such orders were quashed by Higher Courts. Few examples of such cases under IDT & GST are as follows:

When an Order Could be Said to be 'Non-Application of Mind'

REJECTING REQUEST TO CONSULT AUDITOR

M/S Sangeeteha Match Works vs The State Tax Officer (Inspection Cell) – Madras High Court [W.P.(MD).Nos.2603 and 2604 of 2020 and W.M.P.(MD).Nos.2248 & 2249 of 2020 dated 11.12.20]

In terms of Section 75(5) of CGST Act the respondent has got power to grant further time to reply to the show cause notice if sufficient cause is shown by the assessee. The proviso gives the power to respondent to grant three extensions to the assessee for submission of reply. When various defects have been pointed by the respondent for the subject assessment years and when spot inspection was conducted by the Enforcement Wing Officials for a period of 22 days, the reason for seeking extension of time to consult an Auditor is a genuine one and shows sufficient cause for seeking extension. Rejecting the petitioner’s request for extension of time to send a reply to the show cause notice, Respondent passed the Order. Held that the impugned assessment orders has been passed within a very short span of time and in violation of principles of natural justice and without application of mind.

ARBITRARILY REJECTION OF REFUND APPLICATION

M/s World Home Textiles Inc vs The Additional Commissioner (Appeals), Tiruchirappalli Madras High Court [W.P.(MD) No.17471 of 2020 Order dated 10.12.2020]

Rejection of application for refund without affording sufficient opportunity of hearing. Held that, when Rule 92(3) of the CGST Rules, 2017 makes hearing mandatory before rejecting any application for refund, the respondents have arbitrarily and by total non-application of mind rejected the petitioner’s application for refund. The refund application submitted by the petitioner required to be considered afresh on merits and in accordance with law after giving sufficient opportunity of hearing to the petitioner, matter allowed by remand.

EX-PARTE ORDER PASSED BEFORE PERSONAL HEARING

ARSK Hardwares & Traders vs State Tax Officer, Madurai – Madras High Court [W.P(MD) NOS.5150, 5162 and 5164 of 2021, WMP(MD) NOS.4131, 4134, 4135, 4139 AND 4140 of 2021, Order dated 23.04.2021]

Where Competent Authority passed ex parte assessment order dated 7-2-2020 on assessee, since impugned order of assessment had been passed on 7-2-2020, whereas personal hearing had been on 3-12-2020, after much latter impugned order of assessment made, there was total non-application of mind on part of Competent Authority in passing assessment order and said order deserved to be set aside.

AMPLE INDICATION THAT ASSESSING AUTHORITY HAD, MORE OR LESS, MADE UP HIS MIND TO IMPOSE A PENALTY ON ASSESSEE

Flipkart Internet (P.) Ltd. vs State of Kerala – High Court Kerala [W.P. (C) NOS. 5348 and 6916 of 2015 Order dated 20.10.2015]

Where Assessing Authority had imposed penalty upon assessee under section 67, since penalty notice issued gave ample indication that Assessing Authority had, more or less, made up his mind to impose penalty on assessee and findings in penalty order reflected a patent nonapplication of mind by Assessing Authority and also smack of arbitrariness, penalty order was liable to be quashed.

ASSESSEE DISCLOSED TURNOVER REJECTED WHEN STOCK HAS BEEN KEPT WEIGHTWISE

Rana Jewellers (Gold) vs Commissioner of Trade Tax – High Court – Allahabad [TRADE TAX REVISION NO. 209 OF 2002 Order dated 06.05.2002]

Disclosed turnover disbelieved on ground of non-maintenance of stock register. Assessee’s reply to show cause notice that details of stock has been kept weightwise. Not accepted by Assessing Authority. Show cause notice and written statement of assessee not considered by Tribunal. Non-application of mind by the Tribunal on crucial question canvassed by the revisionist. Tribunal under statutory obligation to consider the issue. Order of Tribunal not sustainable.

CONCLUSION

Thus, you can understand that importance of application of mind in hearings. The essence of justice requires that a person who is to decided must give the parties a fair hearing before him enabling them to state their case and view. That no order to the detriment of a person can be passed without hearing him is a well-settled proposition of law and hearing in this context means a fair hearing. Hearing to be fair must be “at a meaningful time and in a meaningful manner”.

Author Bio

Qualification: CA in Practice
Company: Abhishek Raja and Associates
Location: Delhi, Delhi, India
Member Since: 18 Aug 2018 | Total Posts: 18
Abhishek Raja Ram - Popularly known as "Revolutionary Raja" is FCA, DISA, Certificate Courses on – Valuation, Indirect Taxes , GST etc, M. Com (F&T) Mr. Abhishek Raja “Ram” is a Fellow member of ICAI, qualified in 2006, and holds Master’s-Degree in Commerce. He has more than a 15 ye View Full Profile

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