2023 (9) TMI 766 - HC - GST

Violation of principles of natural justice - impugned order preceded a SCN but has concluded the proceedings by holding that the petitioner had not participated in the personal hearing - HELD THAT - The decision of the Hon'ble Supreme Court in M/s.Dharampal Satyapal Limited Vs. Deputy Commissioner of Central Excise, Gauhati and others, 2015 (5) TMI 500 - SUPREME COURT stating that there cannot be any straight jacket formula as far as the violation of principles of natural justice is concerned, cannot be applied to the facts of the case. The decision of the Hon'ble Supreme Court prima facie cannot be applied to the facts of this case. To take such an extreme view as was contended by the learned Government Advocate for the respondent by applying the ratio therein in the context of GST law would amount to dilution of the safeguards under the statute. The legislature has itself provided for safeguards under the statute at each stage of the proceeding. Therefore, such safeguards cannot be diluted. The impugned order is quashed and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law within a period of six weeks from the date of receipt of a copy of this order - Petition allowed by way of remand.

Summary

Issues involved: Challenge to impugned order for violation of principles of natural justice, denial of Input Tax Credit, confirmation of demand without personal hearing.

Violation of Principles of Natural Justice:
The petitioner challenged the impugned order for being passed in violation of principles of natural justice, as it concluded the proceedings without the petitioner participating in the personal hearing, despite a Show Cause Notice being issued earlier. The respondent defended by stating that notices were duly served, including a notice of personal hearing, and since the petitioner failed to respond or appear, a further notice was issued. The petitioner argued that without being given an opportunity to be heard, confirming the demand was unjustifiable. The Court observed that the impugned order confirming the demand without the petitioner's participation in the hearing was not sustainable. The Court emphasized the importance of providing opportunities for a personal hearing before confirming demands under the GST law.

Denial of Input Tax Credit:
The issue in the Show Cause Notice pertained to the denial of Input Tax Credit availed based on invoices from a dealer whose registration was canceled for facilitating illegal credit availing. The petitioner contended that the dealer had discharged the tax liability on the invoices issued, and therefore, the credit should not be denied. The Court noted the arguments but focused on the procedural aspect of ensuring the petitioner's right to a personal hearing before confirming any demand.

Confirmation of Demand without Personal Hearing:
The Court referred to a Supreme Court decision highlighting the importance of following principles of natural justice and providing personal hearings before confirming demands. It stated that diluting such safeguards under the GST law would set an unhealthy trend and confirmed demands without giving a personal hearing would be unjust. Consequently, the Court quashed the impugned order and remitted the case back to the respondent for a fresh order to be passed within six weeks, ensuring the petitioner is heard before any decision is made. The Writ Petition was disposed of with these observations, emphasizing the need for procedural fairness in such matters.