Case Law Details
KPB Chits Limited Vs Joint Commissioner Tax Payers Services (Kerala High Court)
In a latest GST judgment by the High Court of Kerala, the court addressed a case involving M/S.KPB Chits Limited. The petitioner challenged the assessment order passed by the Assistant State Tax Officer, alleging a violation of the principle ‘he who decides must hear’ and non-compliance with the provisions of Section 75(4) of the Kerala State Goods and Services Tax Act, 2017/Central Goods and Services Tax Act, 2017 (KGST/CGST Act). This article will analyze the judgment and its impact for taxpayers.
Background
M/S.KPB Chits Limited, a registered taxable dealer under the KGST/CGST Act, received a show cause notice (Ext. P3) from the 2nd respondent State Tax Officer under Section 73(1) of the Act. In response, the petitioner submitted a reply (Ext. P5) during the personal hearing held on 17.05.2023. However, the assessment order (Ext. P6) was passed by the Assistant State Tax Officer, who did not hear the petitioner. The petitioner contended that this violated the principle ‘he who decides must hear’ and the provisions of Section 75(4) of the Act.
Court’s Analysis
The court examined the doctrine of ‘he who heard must decide/he who decides must hear’. It held that while the doctrine applies to statutory authorities and their decisions, it does not apply to institutional decisions. The determination of tax liabilities requires individual adjudication and decision by the ‘proper officer’. If the officer who hears the case does not render the decision, it would amount to a violation of principles of natural justice.
Section 75(4) of the KGST/CGST Act
The court referred to Section 75(4) of the KGST/CGST Act, which provides 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.
Court’s Decision
The court held that the assessment order (Ext. P6) was passed in violation of the principles of natural justice and the mandate of Section 75(4) of the KGST/CGST Act. Consequently, the court set aside the order and directed the 3rd respondent, the Assistant State Tax Officer, to pass fresh orders after affording an opportunity of hearing to the petitioner and in accordance with the law.
Implications for Taxpayers and Tax Authorities
This judgment highlights the importance of adhering to the principles of natural justice in GST assessments. Tax authorities must ensure that the officer who hears the case is the one who renders the decision, as this is essential for a fair determination of tax liabilities. Taxpayers, on the other hand, should be aware of their right to a personal hearing and should exercise it when necessary to safeguard their interests.
Conclusion: The Kerala High Court’s decision in M/S.KPB Chits Limited vs Joint Commissioner Tax Payers Services upholds the principle ‘he who decides must hear’ in GST proceedings. By setting aside the assessment order and directing a fresh decision with proper adherence to natural justice, the court reinforces the importance of procedural integrity in tax assessments. This ruling serves as a pivotal reminder for both taxpayers and tax authorities to uphold fairness and transparency in all stages of GST adjudication.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner is a registered taxable dealer under the Kerala State Goods and Services Tax Act, 2017/Central Goods and Services Tax Act, 2017 (KGST/CGST Act). Pursuant to Ext. P3 show cause notice issued by the 2nd respondent State Tax Officer under Section 73(1) of the KGST/CGST Act, the petitioner submitted Ext. P5 reply, which was handed over to the 3rd respondent during the personal hearing held on 17.05.2023 and later uploaded through online portal. The 3rd respondent, the Assistant State Tax Officer, finalized the assessment and passed Ext. P6 order under Section 73(9) of the KGST/CGST Act.
2. The petitioner states that Ext. P6 order is not passed by the officer who heard the petitioner pursuant to Ext. P4 notice of hearing, but by an officer who never heard the petitioner. The petitioner contends that Ext. P6 order has been passed in violation of the principle ‘he who decides must hear’ and is against the provision under Section 75(4) which mandates personal hearing in cases where adverse decision is contemplated. Accordingly, this writ petition is filed to quash Ext. P6 order.
3. Heard Sri. Hrithwik D. Namboothiri, the learned counsel for the petitioner and Smt. Jasmine, the learned Government Pleader.
4. Smt. Jasmine, on instructions, submits that the officer who passed Ext. P6 did not hear the petitioner.
5. The doctrine ‘he who heard must decide/he who decides must hear’ applies to statutory authorities and their decisions, but not to institutional decisions, which negate the doctrine. The determination as to whether tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised etc requires individual adjudication and decision by the ‘proper officer’. If the officer who hears does not render the decision determining the tax, it would amount to violation of principles of natural justice.
6. Section 75(4) of the KGST/CGST Act provides 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. The object of the provision is to ensure a fair determination of tax.
7. Ext. P6 order has been passed in violation of the principles of natural justice and the mandate of Section 75(4) of the KGST/CGST Act, and the same is set aside.
The 3rd respondent shall pass fresh orders after affording an opportunity of hearing to the petitioner and in accordance with law. The petitioner shall appear before the 3rd respondent on 18.06.2024 without further notice of hearing and the 3rd respondent shall pass orders within one month thereafter.
The writ petition is disposed of.
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