2025 (1) TMI 1507 - HC - GST

Violation of principles of natural justice - denial of fair opportunity to respond to a Show Cause Notice - SCN uploaded under the Additional Notices tab on the GST portal - HELD THAT - Clearly petitioner has made out a case that Petitioner has missed out the receipt of the notice as it was merely uploaded on the portal under the category of Additional Notices tab and accordingly could not respond to the Show Cause Notice. The impugned order dated 14-3-2024 is set aside. Since the only reason for passing the impugned order is that Petitioner had not filed any reply/explanation Petitioner needs to be granted one opportunity to respond to the Show Cause Notice and thereafter the Show Cause Notice to be re-adjudicated. Petition disposed off.

ISSUES PRESENTED and CONSIDERED

The core legal question considered was whether the petitioner was denied a fair opportunity to respond to a Show Cause Notice due to the manner in which it was communicated, specifically being uploaded under the "Additional Notices" tab on the GST portal, and whether this justified setting aside the subsequent demand and penalty order issued under Section 73 of the Central Goods and Services Tax Act, 2017.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The case revolves around the compliance with procedural requirements under the Central Goods and Services Tax Act, 2017, particularly Section 73, which deals with the determination of tax not paid or short paid. The procedural fairness in serving notices is central to this issue. The legal framework also involves the interpretation of how notices are communicated via the GST portal.

Precedents from the Madras High Court were heavily relied upon, where similar issues of notices being uploaded under inappropriate categories on the GST portal were highlighted. The judgments in W.P. No. 26457/2023 and W.P. No. 22369/2023 emphasized the confusion caused by the complex architecture of the GST web portal, affecting the taxpayers' ability to respond to notices.

Court's Interpretation and Reasoning

The Court interpreted the procedural requirement of notice under the Act as necessitating clear and accessible communication to the taxpayer. It acknowledged the petitioner's argument that the notice was not effectively communicated due to its placement under the "Additional Notices" tab, which was not the expected or appropriate location for such significant communications.

The Court found merit in the petitioner's reliance on the Madras High Court's observations regarding the confusion caused by the portal's design. It recognized that the petitioner's failure to respond was not due to negligence but rather due to the systemic issue of notice placement on the portal.

Key Evidence and Findings

The petitioner provided evidence of the notice being uploaded under "Additional Notices" and argued that this categorization was misleading and not in line with standard expectations. The Court accepted this as a valid explanation for the petitioner's lack of response, noting that similar issues had been identified in other cases.

Application of Law to Facts

The Court applied the principles of procedural fairness and the need for clear communication of notices under the GST framework. It determined that the placement of the notice under "Additional Notices" was a procedural irregularity that justified setting aside the impugned order. The Court emphasized the need for taxpayers to be given a fair opportunity to respond to notices, which was not afforded in this instance due to the portal's design.

Treatment of Competing Arguments

The respondent's argument that the notice was duly uploaded and accessible was considered but ultimately found insufficient. The Court prioritized the taxpayer's right to be adequately informed and the practical difficulties posed by the portal's design, as highlighted in similar cases. The systemic issue of notice placement was deemed significant enough to warrant a fresh opportunity for the petitioner to respond.

Conclusions

The Court concluded that the petitioner was denied a fair opportunity to respond due to the improper categorization of the notice on the GST portal. It set aside the impugned order and directed the respondent to allow the petitioner to file a response and participate in a re-adjudication process.

SIGNIFICANT HOLDINGS

The Court held that procedural fairness requires that notices be communicated in a manner that is clear and accessible to the taxpayer. The placement of important notices under inappropriate categories on the GST portal can constitute a denial of the right to respond, justifying the setting aside of resultant orders.

Core Principles Established

1. The importance of clear and accessible communication of notices under the GST framework.

2. Recognition of systemic issues in the GST portal's design that can affect taxpayer rights.

3. The necessity of providing taxpayers a fair opportunity to respond to notices, with procedural irregularities being grounds for setting aside orders.

Final Determinations on Each Issue

The Court set aside the impugned order dated 14-3-2024, directing the respondent to reopen the portal for the petitioner to file a response to the Show Cause Notice. It mandated a re-adjudication process, ensuring the petitioner is granted a personal hearing and a fresh order is passed in accordance with law.

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