2024 (12) TMI 1490 - HC - GST

Challenge to adjudication order - respondent has illegally proceeded to recover the amount from the petitioner even before the expiry of three months as mentioned in the notice as contemplated under Section 78 of the KGST Act - no personal hearing was granted in favour of the petitioner - violation of principles of natural justice - HELD THAT - In the Show Cause Notice dated 13.12.2023, the respondents have clearly stated that date of personal hearing, time of personal hearing and venue for personal hearing would be inapplicable, which is sufficient to come to conclusion that no personal hearing was granted to the petitioner before passing adjudication order. Further, the aforesaid Show Cause Notice dated 13.12.2023 was not received by the petitioner as can be seen from the material on record including the impugned order, which merely states that the said Show Cause Notice was issued to the petitioner through BOWEB and not to the registered e-mail ID of the petitioner or physically to the petitioner. Thus, non serving of the Show Cause Notice upon the petitioner and non-providing/non-granting of personal hearing and passing the impugned adjudication order, is violative of principle of natural justice warranting interference of this Court and consequently, the impugned adjudication order deserves to be quashed and the matter is remitted back to the respondent for reconsideration afresh in accordance with law. Conclusion - The respondents were not entitled to initiate recovery proceedings much less recover the determined amount from the petitioner prior to 27.03.2024 and consequently, the amount recovered by the respondent from the petitioner on 11.03.2024 is clearly without jurisdiction or authority of law and contrary to the facts as well as Section 78 of the KGST Act and necessary directions are to be issued to the respondents to refund the said amount back to the petitioner. Impugned adjudication order at Annexure-B3 under Section 73 dated 28.12.2023 issued by respondent No.1 is quashed - The matter is remitted back to respondent No.1 for reconsideration afresh in accordance with law - petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

- Whether the adjudication order issued under Section 73(9) of the KGST Act, 2017, was validly passed without granting a personal hearing to the petitioner.

- Whether the recovery of the determined amount before the expiry of the three-month period specified in Section 78 of the KGST Act was lawful.

- Whether the proviso to Section 78 of the KGST Act allows for the reduction of the three-month period for recovery without providing written reasons.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Adjudication Order Without Personal Hearing

- Relevant Legal Framework and Precedents: The principles of natural justice require that a party must be given an opportunity to be heard before any adverse order is passed against them.

- Court's Interpretation and Reasoning: The court noted that the show cause notice did not specify a date, time, or venue for a personal hearing, indicating that no personal hearing was granted. This was deemed a violation of the principles of natural justice.

- Key Evidence and Findings: The show cause notice was issued through BOWEB and not sent to the petitioner's registered email or physically, which the court found insufficient for proper notice.

- Application of Law to Facts: The court applied the principles of natural justice, concluding that the lack of a personal hearing invalidated the adjudication order.

- Treatment of Competing Arguments: The respondents argued that the notice was sufficient; however, the court found this argument unconvincing due to the lack of personal hearing.

- Conclusions: The adjudication order was quashed due to the violation of the principles of natural justice.

Issue 2: Legality of Recovery Before the Expiry of the Three-Month Period

- Relevant Legal Framework and Precedents: Section 78 of the KGST Act provides a three-month period for payment of the determined amount before recovery proceedings can commence.

- Court's Interpretation and Reasoning: The court found that the recovery before the expiry of the three-month period was without jurisdiction and authority.

- Key Evidence and Findings: The notice accompanying the adjudication order specified a payment deadline of 27.03.2024, but recovery was initiated on 11.03.2024.

- Application of Law to Facts: The court applied Section 78, determining that the premature recovery was unlawful.

- Treatment of Competing Arguments: The respondents claimed the proviso allowed early recovery, but the court found no written reasons justifying this.

- Conclusions: The recovery was deemed unlawful, and directions were issued for a refund.

Issue 3: Applicability of the Proviso to Section 78

- Relevant Legal Framework and Precedents: The proviso to Section 78 allows for a reduced recovery period if justified in writing.

- Court's Interpretation and Reasoning: The court held that the proviso was inapplicable as no written reasons were provided for reducing the period.

- Key Evidence and Findings: The notice did not contain any reasons for invoking the proviso.

- Application of Law to Facts: The absence of written justification meant the proviso could not be invoked.

- Treatment of Competing Arguments: The respondents' argument for early recovery under the proviso was rejected.

- Conclusions: The proviso was not applicable, and the recovery was unlawful.

3. SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes: "Non serving of the Show Cause Notice upon the petitioner and non-providing/non-granting of personal hearing... is violative of principle of natural justice warranting interference of this Court."

- Core Principles Established: The principles of natural justice require a personal hearing before adverse orders. Recovery under Section 78 must respect the three-month period unless justified in writing.

- Final Determinations on Each Issue: The adjudication order was quashed, the matter remitted for reconsideration, and the premature recovery was ordered to be refunded.