Case Law Details
Kec International Limited Vs Union of India And 3 Others (Allahabad High Court)
Introduction: In a recent judgment that underscores the importance of procedural fairness in tax administration, the Allahabad High Court in “Kec International Limited Vs Union of India And 3 Others” has set a significant precedent regarding the handling of GST refund recoveries. This case highlights the critical interplay between statutory provisions and the principles of natural justice within the framework of Indian tax law.
Detailed Analysis
The petitioner, KEC International Limited, a works contractor, found itself entangled in a legal dispute after a refund sanctioned by the revenue authorities was later sought to be recovered through a show cause notice under section 73 of the CGST Act. The contention revolved around the procedural impropriety and disregard for the mandatory hearing rights enshrined under section 75(4) of the CGST Act.
The heart of the dispute lay in two major contentions raised by KEC International. Firstly, the company argued that recovery proceedings initiated under section 73 of the CGST Act could not proceed without first challenging the refund order (RFD-06), asserting that doing so would essentially amount to an unauthorized review of the decision. Secondly, it was contended that the order for recovery was passed in violation of section 75(4) of the Act, which mandates the right to a hearing before any adverse order is passed.
The Allahabad High Court, upon careful consideration, sided with the petitioner, setting aside the recovery order. The Court’s decision was grounded in several key findings:
- Mandatory Right to Hearing: The Court reaffirmed that the right to a hearing is not merely procedural but a fundamental aspect of justice, especially when an adverse order is contemplated.
- Violation of Principles of Natural Justice: It was observed that bypassing the hearing process amounted to a gross violation of natural justice principles, which could not be rectified by simply resorting to an alternate remedy.
- Unnecessary Litigation: The Court noted that actions taken without affording a proper hearing lead to unnecessary litigation, burdening the judicial system and the parties involved.
- No Costs Imposed: Interestingly, the Court refrained from imposing costs on the department, recognizing the fair submission made by the Revenue counsel.
The judgment also provided remedial directions, mandating the respondent to afford an opportunity of hearing to KEC International and to pass a fresh order on the matter within a specified timeframe.
Conclusion: The Allahabad High Court’s ruling in “Kec International Limited Vs Union of India And 3 Others” is a landmark decision reinforcing the indispensable role of hearing rights in the administration of justice, particularly within the tax domain. By setting aside the recovery order for lack of a hearing, the Court has sent a clear message about the importance of adhering to procedural norms and the principles of natural justice. This judgment not only provides relief to KEC International but also serves as a critical reminder to revenue authorities about the fundamental rights of taxpayers and the essential requirements for a fair adjudication process.
The matter was argued by Ld. Counsel Bharat Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Shri Bharat Raichandani (through VC) along with Shri Namit Kumar Sharma, learned counsel for the petitioner, Sri Ankur Agarwal, learned Standing Counsel for the State-revenue authorities and Shri Anant Kumar Tiwari, learned counsel for the Union of India.
2. Challenge has been raised to the order dated 22.11.2023 passed by Joint Commissioner (Corporate Circle), State Tax, Saharanpur, Headquarter-Muzaffarnagar referable to Rule 142(5) of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as ‘Act, 2017’) for the period January, 2021. By that order, the revenue authorities have reversed the refund earlier granted to the petitioner for the said period.
3. Short submission has been advanced by learned counsel for the petitioner. The impugned order was preceded by a solitary notice dated 16.10.2023. The date fixed for hearing was 16.11.2023. Though, it is undisputed to the revenue authorities that the petitioner had sought adjournment of two weeks by e-filing adjournment application dated 15.11.2023, the revenue authority has proceeded to reject that application on a perverse reasoning of repeated adjournment sought. Without affording any opportunity of hearing and in complete denial of the petitioner’s right to that under Section 75(4) of the Act, 2017, the impugned order has been passed only to deny the refund that is otherwise due to the petitioner.
4. While learned counsel for the Revenue has strenuously urged that the petitioner may avail statutory remedy of appeal against the order, on query put to him, he could not deny either the fact that the first date fixed in the proceeding was 16.11.2023 or the fact that the petitioner had filed adjournment application for the date fixed. These facts are borne out from the face of the record. The impugned order itself recites in its 3rd paragraph that adjournment application was uploaded by the petitioner on the portal. However, no reason has been ascribed to reject the same.
5. Section 75(4) of the Act, 2017 gives perfect right to the petitioner to be personally heard before any adverse order may be passed.
6. For the facts noted above, the impugned order cannot be sustained.
7. Since the statutorily incorporated right of natural justice has been violated for no good reason, we observe that alternate remedy that otherwise exists may not operate as a bar to entertain the present petition. Besides the fact that the petitioner has a right of hearing, rule of law also commends that obligation to provide such an opportunity be duly enforced on the revenue authorities as may not give rise to fruitless and wholly avoidable litigation as has arisen in the present petition.
8. Since the learned counsel for the Revenue has made a fair statement, we do not propose to impose cost that otherwise is invited by the conduct offered by the revenue authorities.
9. Accordingly, the writ petition is allowed. The order dated 22.11.2023 is set aside. The matter is remitted to the respondent no. 3 to pass a fresh order after affording opportunity of hearing to the petitioner. It is further provided that the petitioner may file its detailed reply to the show cause notice within a period of two weeks from today. Thereupon the said authority may fix a proper date for hearing with at least 15 days notice in advance and pass appropriate order thereafter, as expeditiously as possible, preferably within a period of one month from the date of hearing.
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