2025 (2) TMI 1171 - HC - GST

Violation of principles of natural justice - challenge to order of assessment passed by the respondent in DRC-07 - whether the impugned order is an ex pare order and the mode of service adopted by the respondent is an effective service in terms of the provisions of Section 169 of the GST Act? - HELD THAT - In the present case it is the main grievance of the petitioner that since the notices were uploaded by the respondent-Department in the different column View Additional Notices/Orders instead of the uploading the same in the usual column i.e. View Notices/Orders the petitioner has failed to view the same as the petitioner only get used to view the Portal under the usual column i.e. View Notices/Orders. Thus it is clear that the new modus operandi adopted by the respondent-Department i.e. sending notice through On-line Portal is the seat of all problems for the assessees which opened the floodgate for all the assessees to file litigations before this Court seeing necessary relief. The service of notice should be first by way of initial modes viz. by giving/tendering it directly or by a messenger including a courier; by registered post or speed post or courier; and by sending a communication to assessee s e-mail address (169.1(a) to (c)) and thereafter by making it available on the common portal; by publication in a newspaper (169.1(d) (e). If none of these modes is practicable by affixing it in some conspicuous place at assessee s last known place of business or residence (169.1(f). The provision further provides that every decision summons notice or any communication shall be deemed to have been served when it is tendered or published or a copy thereof is affixed and also when the same is sent by registered post or speed post. In the case on hand admittedly the show cause notice sent by the respondent via. Online Portal has not been noticed by the petitioner and the reasons assigned by the petitioner for not having noticed the said notice is that he is an illiterate and has no computer knowledge and hence he is not well-accustomed with the GST operation system and further notice has been uploaded in the different column viz. View Additional Notice/Orders which not only the petitioner-assessee but most of the assessees including the Consultants engaged by them are not aware that the notices are being uploaded under the different column via. View Additional Notices/Orders column. Though it is contention of the learned Government Advocate that the respondent-Department has caused three reminders to the show cause notice when the first notice (viz. Show Cause Notice dated 22.05.2024) sent by the respondent itself via. On-line GST Portal been noticed by the petitioner/assessee no useful purpose would be served by sending three reminders to such notices. Conclusion - This Court has no hesitation to hold that the impugned order is an ex parte order as the same suffers from violation of principles of natural justice and is liable to be aside on account of the fact that the petitioner has not been heard before passing such order. Therefore this Court is inclined to set aside the impugned order. The matter is remanded to the respondent for fresh consideration - Petition allowed by way of remand.

Summary

The core legal questions considered by the Court in this matter are:

1. Whether the impugned order of assessment passed by the respondent without hearing the petitioner amounts to an ex parte order violating principles of natural justice.

2. Whether the mode of service of notices and communications adopted by the respondent-specifically uploading notices on the GST Portal under the "View Additional Notices/Orders" column-is an effective and valid mode of service under the provisions of Section 169 of the Central Goods and Services Tax Act (CGST Act).

3. Whether the petitioner, being an illiterate person unfamiliar with computer systems, can be held responsible for failing to notice the online communications and thereby deprived of an opportunity to respond.

4. Whether the respondent ought to have resorted to alternate modes of service, such as physical service by Registered Post with Acknowledgment Due (RPAD), after repeated failure to elicit response through online portal notices.

5. The appropriate remedy and directions in light of the above issues, including the status of the bank attachment notice issued pursuant to the impugned order.

Issue-wise Detailed Analysis:

Issue 1: Whether the impugned order is an ex parte order violating principles of natural justice.

The petitioner contended that the impugned order was passed without hearing them, as they were unaware of the show cause notice and reminders due to the notices being uploaded in an unusual column on the GST Portal. The petitioner, being illiterate and unfamiliar with computer operations, could not respond or appear for personal hearing. The petitioner argued this amounted to a violation of natural justice principles, rendering the order ex parte.

The respondent asserted that ample opportunities were given to the petitioner to respond, including issuance of the show cause notice and three reminders, all uploaded on the GST Portal. The petitioner failed to avail these opportunities, and hence the impugned order was rightly passed confirming the proposals in the show cause notice. The respondent denied the order being ex parte.

The Court observed that the petitioner was indeed not aware of the notices as they were uploaded under the "View Additional Notices/Orders" column instead of the usual "View Notices/Orders" column. This mode of service failed to bring the notices effectively to the petitioner's attention. The Court recognized that the petitioner's illiteracy and lack of computer knowledge contributed to the failure to notice the communications. Given the absence of any response or hearing opportunity, the Court held that the impugned order was passed in violation of natural justice and thus amounted to an ex parte order.

Issue 2: Validity and effectiveness of the mode of service adopted by the respondent under Section 169 of the CGST Act.

Section 169 of the CGST Act enumerates the modes of service for decisions, orders, summons, notices, or other communications. The modes include direct delivery, registered post with acknowledgment, email communication, making the notice available on the common portal, publication in newspapers, and affixing notices at the place of business or residence if other modes are impracticable.

The respondent relied on clause (d) of Section 169, which permits making the notice available on the common portal (GST Portal) as a valid mode of service. The respondent argued that most taxpayers engage GST practitioners who regularly access the portal and that the petitioner ought to have engaged such a consultant or been aware of the notices.

The petitioner argued that the notices were uploaded in an unusual column on the portal and that the petitioner, being illiterate and not computer savvy, was unaware of the notices. The petitioner contended that service by mere uploading in an unusual portal column cannot be deemed sufficient service, especially when no physical service was attempted.

The Court analyzed Section 169 and noted that while online service is a recognized mode, it is not the exclusive mode. The provision envisages a hierarchy or combination of modes to ensure effective service. The Court emphasized that if an assessee does not respond to notices served through the portal or email, the department must resort to other effective modes such as physical service by RPAD or courier to ensure the notice reaches the addressee. The Court observed that repeated uploading of notices on the portal without response does not fulfill the requirement of effective service and violates the principles of natural justice.

The Court further noted that technological advancements should aid tax administration but cannot replace traditional modes of service where the assessee lacks access or knowledge of the technology. The Court underscored that the department should verify the effectiveness of the mode of service and switch to physical modes if online service fails to elicit response.

Issue 3: Responsibility of the petitioner given their illiteracy and lack of computer knowledge.

The respondent contended that ignorance of law or procedure is not an excuse and that the petitioner should have engaged a GST practitioner to monitor the portal and respond to notices. The respondent argued that the petitioner cannot plead ignorance of the online system to avoid liability.

The Court acknowledged the principle of ignorantia juris non excusat but balanced it against the realities of the petitioner's illiteracy and lack of computer knowledge. The Court recognized that many taxpayers rely on consultants, who themselves may not promptly access or notice all communications, especially when notices are uploaded in unusual portal locations. The Court held that the petitioner's inability to access or understand the online portal effectively deprived them of notice and opportunity to be heard, which is a fundamental requirement under natural justice.

Issue 4: Whether the respondent ought to have adopted alternate modes of service after failure of online notices to elicit response.

The petitioner argued that the respondent should have resorted to physical service by RPAD or other recognized modes after failure of online notices to elicit any reply. The petitioner contended that repeated online reminders without physical service were futile and unfair.

The respondent contended that online service is the modern and efficient mode and that most taxpayers and their practitioners rely on it. The respondent asserted that physical service is resorted to only when email communications bounce back or are undelivered.

The Court held that the department must ensure effective service and cannot mechanically continue with online notices if the assessee does not respond. The Court suggested that after failure of online service, the department should switch to physical service modes such as RPAD, which provides proof of delivery or non-delivery and safeguards the interests of both parties. This approach is consistent with the statutory scheme under Section 169 and principles of natural justice.

Issue 5: Appropriate remedy and directions.

The Court found that the impugned order was passed ex parte and in violation of natural justice due to ineffective service of notices. The Court set aside the impugned order and remanded the matter to the respondent for fresh consideration.

The Court directed the petitioner to file a reply with supporting documents within three weeks of receiving a copy of the order. The respondent was directed to consider the reply, issue a clear 14-day notice affording an opportunity of personal hearing, and thereafter decide the matter in accordance with law.

The Court further directed that the bank attachment notice issued pursuant to the impugned order be withdrawn and the petitioner's bank account unfrozen, as the impugned order no longer subsisted.

The Court emphasized that the respondent must adopt effective modes of service and suggested that RPAD would be the best mode where online service fails. The Court noted that technological advancements are intended to alert taxpayers promptly but cannot replace traditional effective modes if the purpose is not achieved.

Significant Holdings:

"The impugned order is an ex parte order as the same suffers from violation of principles of natural justice and is liable to be set aside on account of the fact that the petitioner has not been heard before passing such order."

"Though Section 169 (d) empowers the respondent-Department to send notice via Online Portal, the very same Section prescribes other modes of service as well, and hence, it is expected from the respondent-Department firstly to ensure as to whether mode of service adopted by them would be an effective service in reaping the expected result."

"When the respondent-Department realizes the fact that notice effected via Online portal service does not fetch them any reply/response, then, the respondent, instead of sticking on to the similar mode of service by sending repeated notices/reminders via Online Portal, they could change mode of service and this Court suggests that the traditional way of serving notice through RPAD would be the best mode of service."

"Ignorantia juris non excusat (ignorance of law is not an excuse) nor petitioner seek refuge under the pretext that they do not have computer knowledge to view the Online service, since technologies are getting improved and the petitioner has to get along with the same." However, the Court balanced this principle against the practical realities faced by illiterate taxpayers and held that effective service must be ensured.

"Had the notice caused by the respondent reached the petitioner-assessee's hand, definitely, the petitioner-assesseee would have come forward to file an effective reply/objection and convinced the respondent, whereby, the respondent would have either dropped further initiation of proceedings or else would have provided the reasons for rejection, which would have paved the way for the petitioner to go on Appeal challenging such rejection."

Final determinations:

- The impugned order passed without hearing the petitioner is set aside as ex parte and violative of natural justice.

- Notices uploaded solely under the "View Additional Notices/Orders" column on the GST Portal without effective alternative service do not constitute valid service.

- The respondent must ensure effective service of notices and may resort to physical service such as RPAD if online notices fail to elicit response.

- The bank attachment notice issued pursuant to the impugned order is quashed and the petitioner's bank account is to be unfrozen.

- The matter is remanded for fresh consideration with opportunity to the petitioner to file reply and be heard.