2020 (12) TMI 685 - HC - GST

Principles of Natural Justice - time limitation - main allegation of the petitioner is that prior to passing of the order of demand no show cause notice was ever served upon the petitioner and in fact no order passed by the respondent no. 3 was also ever served upon the petitioner - HELD THAT - In view of the stand taken by the respondents in the counter affidavit it is clear that show cause notice was never served upon the petitioner as well as the reasons for quantification of the demand has also never been served upon the petitioner. In view thereof it is clear that the statutory provisions as well as the principles of natural justice have been clearly violated - Service of the show cause notice at a wrong E-mail address is neither contemplated under the Act nor can it be deemed to be a proper service under the Act. As no show cause notice has ever been served the petitioner never had any occasion to file its reply and thereafter not serving a copy of the reasoned order quantifying the demand is clearly erroneous. The present petition has been filed as the Tribunal contemplated under the GST Act has not been created and the petitioner argues that in the absence thereof he cannot be left remedy less as such he approached this Court - the orders passed are wholly arbitrary and contrary to the manner of passing of the order as prescribed under the Act. There is no hesitation in holding that the orders passed against the petitioner are completely in violation of principles of natural justice. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to tax demand and interest under GST Act, dismissal of appeal on grounds of limitation, non-service of show cause notice, violation of principles of natural justice.

Analysis:

The petitioner, engaged in manufacturing and selling auto parts, challenged a tax demand of ?91,450 and interest imposed by the respondent under GST DRC-07. The petitioner contended that no show cause notice was served before the demand order, and the subsequent appeal dismissal was based on limitation grounds. The petitioner claimed eligibility for input tax credit and alleged lack of receipt of any order prior to the demand notice.

The Court noted the petitioner's argument regarding the absence of a show cause notice and reasoned order, calling for a counter affidavit from the respondents. The counter affidavit admitted sending the notice to the wrong email address due to clerical error. The absence of a reasoned order quantifying the demand was highlighted, indicating a violation of statutory provisions and principles of natural justice.

Emphasizing that service at a wrong email address does not comply with the Act's requirements, the Court found the orders arbitrary and against the prescribed procedure. It concluded that the orders were in clear violation of natural justice principles due to the lack of proper notice and reasoning for the demand imposition.

Consequently, the Court allowed the writ petition, setting aside the orders dated 24.1.2019 and 27.7.2020 passed by the respondents. The petitioner was directed to respond to the now-served show cause notice within four weeks, allowing the respondents to issue fresh orders after a hearing, ensuring compliance with legal procedures.

The judgment highlighted the importance of adhering to statutory provisions and principles of natural justice in tax matters under the GST Act, ensuring proper notice, and reasoned orders to uphold fairness and procedural integrity.