2024 (10) TMI 495 - HC - GST

Dismissal of appeal of the petitioner on the ground of limitation - prayer for for quashing and setting aside the order passed under section 73 (9) of the Central Goods and Service Tax Act, 2017 - requirement of one chance of hearing - violation of principles of natural justice - HELD THAT - It is not in dispute that the managing partner of the petitioner-Firm whose Email ID was the only source of communication between the petitioner-Firm and the respondent- Department was critically ill and was suffering from cancer from the month of 2022 to August 2022. Revenue has not been able to controvert these facts. However, the fact remains that the petitioner-Firm uploaded the return in FORM GSTR 01 and GSTR 3B in the months of March, April and May, 2022 and therefore, the consultant of the petitioner-Firm ought to have been drawn attention of the petitioner about the notice dated 22.02.2022. However, taking into consideration the fact that the managing partner of the petitioner-Firm was not well, the respondent-Department ought to have granted an opportunity of hearing before passing the impugned order dated 04.04.2022 once more so as to comply with the provisions of section 75 (4) of the CGST Act. The respondent-authority is required to give an opportunity of hearing if any adverse order is passed. The fact remains that the notice in Form DRC 01 is issued by the respondent No. 1 before passing order and failure on the part of the petitioner-Firm to reply to such notice would be the sufficient ground for compliance of section 75 (4) of the Act - However, in the facts of the case, when Managing Director of the petitioner-Firm was not well and the petitioner has pleaded the inability to reply to the notice, one fair chance is required to be given to the petitioner to comply with the principle of natural justice. The impugned order dated 04.04.2022 and the appellate order dated 04.09.2022 are hereby quashed and set aside and matter is remanded back to the respondent No. 1 to decide show-cause notice dated 22.02.2022 after giving an opportunity of hearing to the petitioner - Petition allowed by way of remand.

Summary

Issues:
Petition under Article 227 to quash orders under CGST Act, discrepancy in input tax credit, appeal dismissal on limitation grounds, violation of natural justice in passing orders.

Analysis:
The petitioner filed a petition under Article 227 seeking to quash an order passed under section 73(9) of the Central Goods and Service Tax Act, 2017 (CGST Act) and an order dismissing their appeal on limitation grounds. The petitioner, engaged in Real Estate Construction and Development, received a notice for discrepancies in their returns related to high utilization of input tax credit. Despite the petitioner's response, a show-cause notice was issued demanding payment. The petitioner cited the managing partner's illness as the reason for not replying timely. The respondent passed an order determining liability, and the appellate authority rejected the appeal due to limitation. The petitioner argued that the illness prevented them from replying and that the orders violated natural justice.

The respondent contended that the petitioner was aware of the notice based on return filings and should have replied, emphasizing the partnership structure of the firm. The Court noted the managing partner's critical illness and the return filings but highlighted the requirement of granting an opportunity of hearing under section 75(4) of the CGST Act before passing adverse orders. The Court opined that despite the failure to reply, considering the managing partner's health, the respondent should have provided an opportunity for a fair hearing. Consequently, the impugned orders were quashed, and the matter was remanded for a fresh decision with an opportunity for the petitioner to be heard, emphasizing compliance with the principles of natural justice. The Court directed the respondent to decide the show-cause notice within twelve weeks.

In conclusion, the Court's decision focused on upholding principles of natural justice, especially in cases where a party's inability to respond promptly is due to valid reasons such as illness. The judgment emphasized the importance of providing a fair chance for the petitioner to comply with procedural requirements and have their case heard before adverse orders are passed.