Case Law Details
Sri Srinivasa Lorry Transport Vs Assistant Commissioner St and Others (Andhra Pradesh High Court)
An opportunity of personal hearing must be granted before an adverse decision is passed
Andhra Pradesh High Court, in Sri Srinivasa Lorry Transport v. Assistant Commissioner ST (W.P. Nos. 5385 & 5456 of 2021), ruled that an adverse tax decision cannot be passed without granting a personal hearing, even if not explicitly requested. The case arose when the petitioner, an unregistered transporter, was inspected by the tax authorities and later issued an assessment and penalty order under the CGST and APGST Acts. The petitioner challenged these orders on the grounds that no personal hearing was granted and that at least three adjournments should have been provided under Section 75(5) of the CGST Act. The court held that while Section 75(5) limits adjournments to three, it does not mandate a minimum of three adjournments. Furthermore, prior authorization was found unnecessary for assessments under Section 63 of the CGST Act, as it applies specifically to unregistered persons. The court set aside the impugned orders, reaffirming that a taxpayer must be given an opportunity to present their case before an adverse decision is made. The ruling clarifies that while procedural compliance is essential, natural justice principles must be upheld. It also distinguished between authorization for inspections under Section 67 and assessments under Section 63, confirming that no additional approval is needed for the latter. The tax authorities were directed to conduct a fresh assessment, ensuring due process and personal hearing for the petitioner.
Facts:
M/s Sri Srinivasa Lorry Transport, (“the Petitioner”), was carrying a lorry transport business. The premises of the Petitioner were inspected by the Assistant Commissioner (ST) (“the Respondent”), on November 7, 2019. At that time the Petitioner was not a registered dealer under the Andhra Pradesh Goods and Services Tax Act, 2017 (“the APGST Act”) or the CGST Act, 2017. A Show-Cause Notice dated December 17, 2019 was issued on the basis of the said inspection. This notice was received by the Petitioner on December 26, 2019, after receipt of this notice, the Petitioner had submitted a letter dated January 4, 2020, seeking time to file objections. The said letter was received by the Respondent on January 21, 2020. Thereafter, an order dated September 21, 2020 (“the Impugned Order-1”) was passed, apart from this, order dated November 9, 2020 (“the Impugned Order-2”) of penalty was also passed. The Petitioner had filed objections to the assessment in October-2020, after the Impugned Orders had been passed.
Thus, aggrieved by the Impugned Orders, the Petitioner has filed the present writ petitions.
Issues:
- Whether prior authorization is required under Section 63 of the CGST Act for an assessment based on inspection or audit?
- Whether three adjournments are mandatory under Section 75 of the CGST Act before an order is passed?
- Whether an opportunity for personal hearing is required even if not explicitly requested?
Held:
The Hon’ble Andhra Pradesh High Court in W.P. Nos. 5385 & 5456 of 2021 held as under:
- Noted that, Section 67 of the CGST Act requires previous authorization from the competent authority before any officer of the tax department can inspect the premises of the dealer or conduct an audit of the accounts of a dealer. In the present case, such previous authorization had already been given on November 5, 2019.
- Observed that, Section 63 of the CGST Act regulates the assessment of un-registered persons. This provision authorizes the appropriate officer to assess the tax liability of any taxable person who has not obtained registration even though he is liable to obtain such registration. The language in Section 63 of the CGST Act does not provide for any prior authorization being necessary where the assessment has been done by the proper officer. The term “proper officer” is defined, in Section-2(91) of the CGST Act, to mean an officer to whom any function to be performed under the CGST Act is assigned by the Commissioner. The territorial limit of each assessing officer is assigned by the Commissioner. It is stated that the Adanki circle was the territorial circle for the area in which the Petitioner was carrying on business and it was subsequently disbanded and merged into Ongole-1 circle by way of G.O.Ms.No.502, Revenue (CT-1) Department, dated July 1, 2022, which was published in Andhra Pradesh Gazette on July 5, 2022.
- Opined that, the language in this provision is clear and unambiguous. The said provision only places an outer limit on the number of adjournments that can be granted and the said language does not lend itself to an interpretation that a minimum of three adjournments have to be given before any order can be passed.
- Held that, the Respondent was the appropriate assessing authority and as the territorial assessing authority did not require any authorization under Section 63 of the CGST Act. Further, Section 75 of the CGST Act only places an outer limit on the number of adjournments that can be granted and does not lend itself to an interpretation that a minimum of three adjournments have to be given before any order can be passed. Thereby, setting aside the Impugned Orders, while leaving it open to the Respondent to undertake a fresh assessment proceeding and consequential proceeding, if any, after giving an opportunity of personal hearing to the Petitioner.
Our Comments:
Section 63 of the CGST Act, governs “Assessment of unregistered persons”. It provides that notwithstanding anything to the contrary contained in Section 73 of the CGST Act or Section 74 of the CGST Act, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of Section 29 of the CGST Act but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. However, no such assessment order shall be passed without giving the person an opportunity of being heard
Section 75 of the CGST Act, governs “General provisions relating to determination of tax”. Section 75(4) of the CGST Act, stipulates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. Section 75(5) of the CGST Act states that 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. However, no such adjournment shall be granted for more than three times to a person during the proceedings.
Section 67 of the CGST Act, governs “Power of inspection, search and seizure”. It stipulates that no inspection of any dealer can be carried out unless the previous authorization is obtained from the Joint Commissioner or the Commissioner.
This judgment upholds that assessee must be heard before adverse decisions are taken thereby, aligning this decision with previous natural justice rulings. The judgment also clarifies procedural aspects of assessment under Section 63 of the CGST Act.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
The petitioner is carrying on lorry transport business in Gundlapalli Village, Maddipalem Mandal, Prakasam District. The premises of the petitioner were inspected by the 1st respondent on 07.11.2019. At that time the petitioner was not a registered dealer under the Andhra Pradesh Goods and Service Tax Act, 2017 [for short “the APGST Act, 2017] or the Central Goods and Service Tax Act, 2017 [for short “the CGST Act, 2017]. A show-cause notice dated 17.12.2019 was issued, on the basis of the said inspection. This notice was received by the petitioner on 26.12.2019, after receipt of this notice, the petitioner had submitted a letter, dated 04.01.2020, seeking time to file objections. The said letter was received by the 1st respondent on 21.01.2020. Thereafter, an order of assessment was passed on 21.09.2020. Apart from this, an order of penalty was passed on 09.11.2020. It appears that the petitioner had filed objections to the assessment, in October-2020, after the order of assessment had been passed.
2. Aggrieved by these two orders, the petitioner has approached this Court by way of W.P.No.5456 of 2021, challenging the order of assessment dated 21.09.2020 and W.P.No.5385 of 2021 challenging the order of penalty dated 09.11.2020.
3. The common grounds in both these cases, raised in these Writ Petitions are as follows:-
I. The petitioner was not granted an adequate opportunity of hearing as the order had been passed even before the petitioner could file his objections in October-2020.
II. Section-75 of the CGST Act, 2017 requires three adjournments before an order can be passed, whereas no such adjournments were granted to the petitioner.
III. The provisions of the CGST Act, 2017 require the inspecting officer to have previous authorization from the competent authority under Section-67 of the CGST Act, 2017. Apart from this, a separate authorization has to be given for the said inspecting officer to take up assessment proceedings, if the said officer is not the proper officer under the provisions of the CGST Act, 2017. Here, a proper officer would be the territorial assessing authority. In the present case, the 1st respondent was the Assistant Commissioner (ST), Addanki Circle, whereas, the petitioner is presently being assessed by the Assistant Commissioner, Ongole-1 and as such, the 1st respondent ought to have obtained the previous authorization before passing any assessment order. No such authorization has been placed before this Court and consequently, the assessment order and the consequential penalty order would have to be set aside.
4. Sri Shaik Jeelani Basha, learned counsel for the petitioner, has raised the additional ground, that is not supported by pleadings, that the assessment order and the penalty order, impugned in the present Writ Petition, do not have DIN numbers and the absence of such DIN numbers is fatal to both the orders. He relies upon the Judgment of a Division Bench of this Court in the case of M/s. Cluster Enterprises Vs. The Deputy Assistant Commissioner (ST)-2 & Ors, dated 24.07.2024 in W.P.Nos.13375 & 14045 of 2024.
5. The learned Government Pleader for Commercial Tax, in reply to the said contentions and in support of the counter-affidavit filed by the Assistant Commissioner, Ongole circle would submit as follows:-
I. Section-75 of the CGST Act, 2017 only stipulates that more than three adjournments cannot be given. It cannot mean that the three adjournments are compulsory and orders can be passed only after three adjournments.
II. Section-67 of the CGST Act, 2017 stipulates that no inspection of any dealer can be carried out unless the previous authorization is obtained from the Joint Commissioner or the Commissioner. In the present case, such previous authorization was obtained on 05.11.2019 and this an admitted fact. There is no provision for obtaining authorization for connecting assessment proceedings arising out of such inspection, if the assessing authority is the usual territorial assessing authority of such a dealer. In the present case, the petitioner was an un-registered dealer and an assessment of such un-registered dealer is to be carried out under Section-63 of the CGST Act, 2017, There is no provision in Section-63 of the CGST Act, 2017 for requiring any previous authorization.
III. The requirement of DIN numbers on the orders is not mandatory as long as a number is generated by the portal and is available on the order. The purpose of requiring a DIN number or a number generated by the portal is for the purposes of authenticating the orders and to ensure that un-authorized proceedings are not taken up. In the present case, both the order of assessment and the order of penalty contained such numbers generated by the portal and as such, there is substantial compliance.
CONSIDERATION OF THE COURT:-
6. Section-67 of the CGST Act, 2017 requires previous authorization from the competent authority before any officer of the tax department can inspect the premises of the dealer or conduct an audit of the accounts of a dealer. In the present case, such previous authorization had already been given on 05.11.2019.
7. On the question of authorization being necessary for conducting an assessment based on such inspection or audit, the provisions in the CGST Act, 2017 require a closer look. The provisions relating to assessment of a dealer are contained in Chapter-XII of the CGST Act, 2017 consisting of Sections-59 to 64. The provisions relating to demands and recovery are contained in Chapter-XV of the CGST Act, 2017 consisting of Sections-73 to 84.
8. In the present case, the relevant provision would be Section-63 of the CGST Act, 2017 which regulates the assessment of un-registered persons. Section-63 of the CGST Act, 2017 reads as follows:-
“Section-63: Assessment of unregistered persons.
Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the person an opportunity of being heard.”
9. This provision authorizes the appropriate officer to assess the tax liability of any taxable person who has not obtained registration even though he is liable to obtain such registration. The language in Section-63 of the CGST Act, 2017 does not provide for any prior authorization being necessary where the assessment has been done by the proper officer. The term “proper officer” is defined, in Section-2(91) of the CGST Act, 2017, to mean an officer to whom any function to be performed under this Act is assigned by the Commissioner. The territorial limit of each assessing officer is assigned by the Commissioner. The learned Government Pleader for Commercial Tax, draws the attention of this Court to the paragraph No.4 of the counter-affidavit filed by the 1st It is stated that the Adanki circle was the territorial circle for the area in which the petitioner was carrying on business and it was subsequently disbanded and merged into Ongole-1 circle by way of G.O.Ms.No.502, Revenue (CT-1) Department, dated 01.07.2022, which was published in Andhra Pradesh Gazette on 05.07.2022. In the circumstances, it must be held that the 1st respondent, being Assistant Commissioner (ST), Addanki Circle was the appropriate assessing authority and as the territorial assessing authority did not require any authorization under Section-63 of the CGST Act, 2017.
10. Section-75 (5) of the CGST Act, 2017 reads as follows:-
“Section -75: General provisions relating to determination of tax.
(1) …
(2)….
(3) …
(4) ……
(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.”
11. The language in this provision is clear and unambiguous. The said provision only places an outer limit on the number of adjournments that can be granted and the said language does not lend itself to an interpretation that a minimum of three adjournments have to be given before any order can be passed.
12. The petitioner had raised the ground that an adequate opportunity of hearing had not been given to the petitioner. The show-cause notice was received by the petitioner on 26.12.2019. A letter for adjournment was submitted by the petitioner on 21.01.2020. Thereafter, there is absolute silence and no material has been placed before this Court to show that the petitioner had sought further adjournments any kind. In such circumstances, the passing of the assessment order in Sepetember-2020 cannot be faulted on this ground.
13. However, Section-75(4) of the CGST Act, 2017 reads as follows:-
“Section -75: General provisions relating to determination of tax.
(1) …..
(2) ….
(3) …..
(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.”
14. This provision requires an opportunity of hearing to be given if the assessing officer contemplates an adverse decision even if the person does not make any request for such hearing. The show-cause notice dated 17.12.2019 only provides for filing written objections and no personal hearing has been granted. In the circumstances, the said assessment order would have to be set aside leaving it open to the respondents to grant such a personal hearing and to pass orders thereafter.
15. In view of this direction, it would not be necessary for this Court to go into the question of whether a DIN number is needed on every order or not.
16. Accordingly, these Writ Petitions are disposed of setting aside the assessment order, dated 21.09.2020, as well as the penalty order, dated 09.11.2020, impugned in the present Writ Petitions while leaving it open to the 1st respondent to undertake a fresh assessment proceeding and consequential proceeding, if any, after giving an opportunity of personal hearing to the petitioner. There shall be no order as to costs.
As a sequel, pending miscellaneous petitions, if any, shall stand closed.
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