Violation of Natural Justice Principles if Order passed Prematurely

Sunil Enterprises Vs Commissioner Commercial Tax (Allahabad High Court)

The esteemed Allahabad High Court, in the case of Sunil Enterprises vs. Commissioner Commercial Tax [Writ Tax no. 730 of 2023, May 29, 2023], overturned the Adjudicating Authority’s order. The court declared that if the dates for written reply submission and oral hearing have been established and informed to the assessee, then no order of adjudication should be issued prior to these dates.

Facts

Sunil Enterprises (“the Petitioner”) received a Show Cause Notice (“the SCN”) dated April 3, 2021, and subsequently, Order dated May 31, 2021(“the Impugned Order”), was passed by the Deputy Commissioner (“Adjudicating Authority”) against the Petitioner despite the again undisputedly last notice issued to the petitioner, in those proceedings was for the date fixed June 08, 2021 for reply and, June 10, 2021 for personal hearing.

Aggrieved by the Impugned Order the Petitioner filed the present writ petition.

Issue

Whether an order passed by the Adjudicating Authority before the dates provided for filing the reply and personal hearing is violative of the principles of natural justice?

Held

The Hon’ble Allahabad High Court in Writ Tax no. 730 of 2023 held as under:

• Observed that, the Impugned Order had been passed much before the arrival of the dates of reply and personal hearing which was not permissible neither on the basis of principles of natural justice nor Section 75(4) of the Central Goods and Services Tax, Act, 2017 (“the CGST Act”)
• Held that, once the date has been fixed and communicated to the Petitioner both for the purpose of filing written reply and for the purpose of oral hearing then no adjudication order could be passed before the dates have arrived.
• Set aside the Impugned Order and the matter is remitted to the Adjudicating Authority to pass fresh order strictly in accordance with law after providing adequate opportunity of hearing to the petitioner.

Conclusion: The Allahabad High Court’s judgment in the case of Sunil Enterprises vs. Commissioner Commercial Tax serves as an important precedent in highlighting the significance of adhering to natural justice principles in adjudication proceedings. The court emphasized that premature orders are not permissible once the dates for reply submission and personal hearing have been established. This decision reaffirms the importance of fair procedures and upholding the rights of the parties involved.

Relevant Provision:

Section 75(4) of the CGST Act:

“General provisions relating to determination of tax

75(1) ….

75(2) ….

75(3) ….

75(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.”

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Sri Ajay Kumar Yadav learned counsel for the petitioner and Sri Ankur Agarwal learned Standing Counsel.

2. Challenge has been raised to the adjudication order dated 31.5.2021 passed by the Deputy Commissioner, State Tax, Sector-10 Prayagraj with reference to ZD0904210095997 against the petitioner.

3. In the first place, the above order was appealable. Then, period of limitation to file that appeal has epxired.

4. Despite the above two objection raised by the learned Standing Counsel, there is something more fundamental and critical both to the rights of the petitioner as also to the general scheme of the U.P. GST Act, 2017 and its implementation that commends us to entertain this petition.

5. Upon hearing learned counsel for parties, it is undisputed that the first notice of the above SCN/Statement reference issued to the petitioner is dated 03.4.2021. The impugned order has been passed on 31.5.2021 whereas again undisputedly last notice issued to the petitioner, in those proceedings was for the date fixed 08.6.2021 for reply and, 10.6.2021 for personal hearing.

6. Much before the arrival of those dates, impugned order came to be passed and uploaded as has thus been served on the petitioner. Neither on the general rule of natural justice applicable to these proceedings nor in the context of section 75(4) of the Act, the course adopted by the adjudicating authority, was permissible.

7. Plainly, rules of natural justice have been flouted, absolutely. Once date had been fixed and communicated to the petitioner both for the purpose of filing written reply and for the purpose of oral hearing, no adjudication order may have been passed before that date arrived.

8. In view of the above satisfaction reached, in the undisputed facts of the present case, preliminary objections raised by the learned Standing Counsel are overruled.

9. Rule of fairness must prevail to ensure that the needs and requirement of justice are met. To ensure due compliance, writ Court may always and in the present facts, does feel compelled to interfere.

10. Accordingly the order dated 31.5.2021 is set aside. Matter is remitted to the adjudicating authority to pass fresh order strictly in accordance with law, necessarily involving adequate opportunity of hearing being granted to the petitioner, both for the purpose of filing written reply as also of personal hearing. That order may be passed recording adequate reasons to deal with the objections that may be raised by the petitioner.

11. Writ petition is allowed.

12. Let the Registrar Compliance communicate this order to the Commissioner, Commercial Tax, U.P. Lucknow to ensure that such practices are done away in real time.

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(Author can be reached at info@a2ztaxcorp.com)