Madras High Court Sets Aside Order passed Without Opportunity of Hearing

Shido Pharma Vs Assistant Commissioner (ST) (Madras High Court)

In the case of M/s. SHIDO Pharma v. Assistant Commissioner (ST) [W.P. Nos. 10371 to 10373 of 2023 and W.M.P Nos. 10334 to 10336 of 2023 dated April 03, 2023], the Madras High Court rendered a significant judgment. The court found that the assessee was not granted an opportunity of being heard, which goes against the principle of natural justice. As a result, the court set aside the impugned order and directed the Revenue Department to conduct the proceedings afresh.

Facts:

The Assistant Commissioner (ST) intercepted conveyance of M/s. SHIDO Pharma (“the Petitioner”) and issued a Show Cause Notice (“the SCN”) dated March 18, 2023 proposing an addition under the provisions of the Integrated Goods and Service Tax Act, 2017 (“the IGST Act”). The Petitioner on March 24, 2023, filed a reply to the SCN specifying that the provisions of the IGST Act are inapplicable to question the transaction.

However, on the same date the Revenue Department filed a revised notice (“the Impugned SCN”) specifying that the provisions of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) / the State Goods and Services Tax Act, 2017 (“the SGST Act”) are applicable on the transaction. Thereafter, the Revenue Department issued an order of detention of goods under Section 129(3) of the CGST Act (“the Impugned Order”).

Aggrieved by the Impugned Order the Petitioner filed writ before the Hon’ble Madras High Court.

Issue:

Whether the detention of goods without proper hearing to the assessee is acceptable?

Held: 

Madras High Court emphasized the importance of granting an opportunity of being heard to the assessee. The court held that the proceedings conducted without proper hearing violated the principle of natural justice and set aside the Impugned Order. The court directed the Petitioner to appear before the Revenue Department with a reply to the revised notice and instructed the Revenue Department to conduct the proceedings afresh. This judgment underscores the significance of adhering to the principles of natural justice in administrative proceedings.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Mrs. E.Ranganayaki, Additional Government Pleader accepts notice for the respondents and is armed with necessary instructions. The officer is also present before this court to enable the disposal of this petition even at this juncture.

2. The petitioner challenges an order of Goods detention under Section 129 (3) of the State Goods and Services Act, 2017 (in short ‘SGST Act’), read with the relevant provisions of the CGST Act, 2017/IGST Act, 2017/GST(Compensation to States) Act, 2017. The main ground is that the petitioner was not offered any hearing prior to passing of the impugned order.

3. Learned Standing Counsel was requested to produce the records to ascertain this aspect of the matter and has produced a record of personal hearing on 24.03.2023, where the presence of the petitioner is noted. However, that personal hearing is with reference to a notice issued by the respondent on 18.03.2023, that had proposed an addition under the provisions of the Intergrated Goods and Services Tax Act, 2017(in short ‘IGST Act’).

4. The petitioner had filed a detailed reply on 24.03.2023 stating that the provisions of the IGST Act are inapplicable to the transaction in question. On the same date, the respondent has issued a revised notice, in Form GST MOV – 07 proceeding to apply the applicable provisions of the CGST/SGST Act.

5. However, no opportunity was granted to the petitioner to respond to that notice and the petitioner was further never heard. What had transpired on 24.03.2023 was a hearing only in respect of notice dated 18.03.2023 and not subsequent notice dated 24.03.2023.

6. Thus, there is some merit in the allegation that the proceedings have been concluded contrary to the principles of natural justice. Impugned orders bearing Nos.889/2022-23/ADJ, 892/2022-23/ADJ and 890/2022-23/ADJ, all dated 24.03.2023, are thus set aside.

7. The petitioner is permitted to appear before the 1^st respondent on 05.04.2023 at 10.30 a.m., without expecting any further notice in this regard along with a reply to notice dated 24.03.2023. After hearing the petitioner and considering the reply, if any, orders shall be passed de novo within a period of one week from 05.04.2023.

8. These Writ Petitions are allowed in the above terms. No costs. Connected Miscellaneous Petitions are closed.

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