Case Law Details
Future Consumer Limited Vs State of Madhya Pradesh And Others (Madhya Pradesh High Court)
In a recent decision, the Madhya Pradesh High Court dismissed a petition filed by Future Consumer Limited, a public limited company, challenging a tax liability order issued by the Deputy Commissioner of State Tax, Circle-14, Indore. The tax demand amounted to Rs. 54,20,478, which includes interest and penalties, imposed under Section 73 of the Goods and Services Tax (GST) Act.
Background of the Case
Future Consumer Limited, a major player in the food-led FMCG sector, operates under GST registration number 23AABCS0279B1ZW. The company is engaged in branding, manufacturing, and distribution of consumer products across food, home care, and personal care segments. The dispute arose following a tax notice issued by the State Tax Department, highlighting discrepancies in the company’s GST return filings.
The initial notice (Form GST ASMT-10), issued in June 2023, identified discrepancies and required the company to respond. When the company failed to address the notice, a show-cause notice was subsequently issued under Section 73(1) of the GST Act on August 24, 2023, with a summons to appear on September 25, 2023. Despite repeated notices, the company neither responded nor appeared before the tax authorities.
As a result, a final order imposing a tax liability of Rs. 54,20,478 was passed on October 30, 2023. Instead of filing an appeal within the designated period, the petitioner directly sought intervention from the High Court.
Legal Arguments Presented
Represented by Advocate Aditya Goyal, Future Consumer Limited argued that the final order was invalid as the company was denied a personal hearing, which it claimed was a requirement under Section 75(4) of the GST Act. The petitioner referenced a similar case, Technosys Security System Pvt. Ltd. vs. Commissioner, Commercial Taxes, in which the Madhya Pradesh High Court had ruled in favor of the petitioner on the grounds of procedural fairness. In that case, the court set aside the final order due to the absence of a mandated personal hearing post-submission of a show-cause reply.
According to Mr. Goyal, the denial of a personal hearing in Future Consumer’s case violated procedural norms. He also cited a recent Allahabad High Court ruling (Jai Vindhya Udyog vs. State of U.P.), where a similar order was quashed under Section 74 of the GST Act due to non-compliance with hearing requirements.
Government’s Response
Representing the State, Advocate Anand Soni argued that the petitioner’s case was fundamentally different from the Technosys Security System case. He emphasized that Future Consumer Ltd. had not submitted a response to the show-cause notice nor requested a personal hearing. Mr. Soni contended that the petitioner’s lack of participation in the procedural steps, including the absence of a reply or any formal hearing request, disqualified it from claiming any relief based on procedural fairness.
According to the State’s submission, the petitioner failed to utilize the opportunity to present a defense or request a hearing, which the GST Act provides under Section 75(4) only upon a written request. Consequently, the State asserted that Future Consumer’s request for relief was unwarranted as the petitioner’s failure to appear or respond to the show-cause notice negated the obligation to provide a personal hearing.
High Court’s Observations
The High Court reviewed the arguments and carefully examined the provisions of Section 75(4) of the GST Act. The court noted that the act mandates a personal hearing if the taxpayer specifically requests it in writing. The provision allows for such a hearing to be conducted even based on an oral request if the taxpayer appears and expresses the need for it. In this case, Future Consumer had neither submitted a response nor appeared before the tax authority to request a hearing.
The court emphasized that the petitioner’s reliance on the Technosys Security System case was misplaced, as the circumstances were notably different. In Technosys, the petitioner had filed a response but was subsequently denied a personal hearing, leading to the order’s annulment. By contrast, Future Consumer’s non-compliance with procedural steps deprived it of any grounds to argue a lack of due process.
Court’s Decision
After weighing the arguments, the High Court dismissed Future Consumer Limited’s petition. The court found no procedural error on the part of the tax authorities, as the petitioner had not taken the required steps to engage in the process. Additionally, the court noted that Future Consumer could still pursue an appeal if it so wished, provided it sought the condonation of any delay in filing.
The court concluded that the petitioner’s failure to adhere to statutory procedures, including the absence of a response or hearing request, barred it from seeking judicial intervention on the basis of a procedural lapse.
Key Takeaways
1. Importance of Adherence to Procedure: The case underscores the criticality of following statutory procedures in tax disputes. Taxpayers are expected to respond to notices and avail themselves of all procedural rights, including requesting a personal hearing if necessary.
2. Requirement for Personal Hearing: Section 75(4) of the GST Act mandates a personal hearing only upon a specific written request from the taxpayer. Absent such a request or participation, the authorities are under no obligation to initiate a hearing.
3. Legal Precedents: The court highlighted that each case is unique, and taxpayers cannot rely on precedents where the facts are materially different. In this instance, the court distinguished Future Consumer’s case from prior cases due to the petitioner’s non-participation in the process.
4. Alternative Remedies: While dismissing the petition, the court noted that Future Consumer Limited could still pursue an appeal, subject to the condonation of any delay, if it wished to contest the tax demand further.
Conclusion
The Madhya Pradesh High Court’s ruling in Future Consumer Ltd. vs. State of Madhya Pradesh reiterates the judiciary’s emphasis on procedural compliance within the GST framework. By failing to respond to the show-cause notice or request a hearing, Future Consumer Limited effectively forfeited its right to challenge the process on procedural grounds. The court’s decision highlights the importance of timely responses and participation in GST proceedings, while also affirming the limited scope for judicial intervention when procedural requirements are disregarded.
FULL TEXT OF THE JUDGMENT/ORDER OF MADHYA PRADESH HIGH COURT
Petitioner has filed the present petition challenging the order dated 24.08.2023 passed by the respondent Deputy Commissioner, State Tax, Circle-14, Indore under Section 73 of GST Act, whereby the tax liability of Rs.46,62,776/- + interest and penalty, in total 54,20,478/- has been imposed.
02. Instead of availing the remedy of appeal against the impugned order, the petitioner has approached this Court by way of writ petition seeking quashment of the impugned order by placing reliance on a judgment passed by Division Bench of this Court vide order dated 05.12.2023 in Writ Petition No.13618 of 2023 (M/s Technosys Security System Private Limited V/s Commissioner, Commercial Taxes and another)
03. Shri Aditya Goyal, learned counsel for the petitioner submits that the Division Bench in case of M/s Technosys Security System Pvt. Ltd. (supra) has held that the petitioner was entitled for personal hearing as contemplated under sub-section (4) of Section 75 of GST Act. As a result of which, the impugned proceedings after the stage of the reply to the show-cause notice were set aside with the direction to provide an opportunity of hearing, therefore, the similar relief be granted to the petitioner.
04. Per contra, Shri Anand Soni, learned Additional A.G. for the respondent / State objects that the petitioner is not entitled for the similar relief as granted by the Court in case of M/s Technosys Security System Pvt. Ltd. (supra) because in the present case, the petitioner did not even file the reply to the show-cause notice and did not appear before the competent authority. In case of M/s Technosys Security System Pvt. Ltd. (supra), the petitioner filed the reply, but he was not given the opportunity of personal hearing, therefore, the matter was remitted back to the authority.
05. Shri Goyal, learned counsel for the petitioner has strongly placed reliance on a judgment passed by Allahabad High Court in case of M/s Jai Vindhya Udyog V/s State of U.P. in Writ Tax No.190 of 2023, in which the Division Bench has set aside the impugned order passed under Section 74 of the GST Act.
We have heard learned counsel for the parties at length and perused the entire record.
06. Petitioner is a Public Limited company having its presence in the address mentioned in the memo of parties above. Petitioner is a Food led – FMCG brand engaged in the business of branding, manufacturing, processing, selling and distribution of consumer products. The Petitioners product categories include food, home care, personal care and beauty. Petitioner is registered with GST No.23AABCS0279B 1ZW.
07. Respondent No. 3 i.e. Deputy Commissioner State Tax, Circle -14, Indore is the jurisdictional authority who has been empowered to adjudicate the case of petitioner pertaining to Goods and Services Tax matters. Respondent No. 2 is Commissioner of State Tax, having its jurisdiction over petitioner for Goods and Service Tax matters. Respondent No.1 is the Finance Department, State of Madhya Pradesh having their jurisdiction over petitioner to exercise its legislative power to make laws for the whole or any part of the territory in Madhya Pradesh.
08. The respondent served the notice in form GST ASMT-10 dated 06.2023 to the petitioner intimating discrepancies in the return after the scrutiny, the petitioner was directed to explain the reasons for the said discrepancies. The petitioner did not appear before the authority, therefore, a show-cause notice under Section 73(1) of GST Act dated 24.08.2023 was issued directing the petitioner to appear on 25.09.2023. Admittedly, the petitioner neither appeared nor filed the reply hence, the final order dated 30.10.2023 was passed. The petitioner did not prefer any appeal within the period of limitation and directly approached this Court by way of writ petition solely on the ground that the opportunity of personal hearing as contemplated under Section 75(4) of GST Act has not been afforded to him, therefore, the order is unsustainable in law.
09. Sub-section (4) of Section 75 of GST Act says that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with the tax or penalty or any adverse decision is contemplated against such person. The Division Bench of this Court has held that the opportunity of hearing means persons opportunity of hearing and if such personal opportunity of hearing is not provided then the order is unsustainable and liable to be set aside.
10. As per sub-Rule 4 an opportunity of personal hearing shall be granted where a request is received in writing from a person chargeable with the tax or penalty. Even if the request is not received in writing, the oral request is also liable to be accepted provided the person appears and makes a request for grant of an opportunity of hearing, then only he can plead or claim an opportunity of personal hearing. When the person after receipt of the show-cause notice choose not to appear before the authority to file a reply or to make a request for personal hearing, then after passing the final order, he cannot allege that an opportunity of hearing has been denied to him, therefore, the case of the petitioner is distinguishable from the case of M/s Technosys Security System Pvt. Ltd. (supra).
11. In view of the above, this Writ Petition stands dismissed The petitioner, if so advised, may file an appeal on merit before the Appellate Authority alongwith an application for condonation of delay.
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