2025 (2) TMI 1012 - HC - GST

Violation of principle of natural justice - personal hearing was denied - difference in the amount of Input Tax Credit (ITC) for the tax period April 2018 to March 2019 - HELD THAT - A bare look at the show cause notice issued under Section 73 of the Act (Annexure - 5) would reveal that date of filing of reply and date of personal hearing are the same i.e. 20.01.2024. This Court has repeatedly frowned on the action of the respondents in fixing identical date of reply and date of hearing as the same apparently is an empty formality and essentially results in violation of principle of natural justice. It would be seen that show cause notice was issued on 10 points and while on 7 points the same was accepted that also without indicating any reason on 3 points only a cursory observation has been made that no evidence has been produced pertaining to deposit of tax through RCM and the accounts books have not been verified. Such a cursory disposal of the objection raised in reply to the show cause notice cannot be countenanced when plea raised is very specific. In view of above fact situation wherein besides non granting of opportunity of hearing the order impugned i.e. 30.04.2024 passed is wholly cursory the same cannot be sustained. So far as the challenge laid to order passed under Section 161 of the Act rejecting the rectification application is concerned in view of the fact that the order dated 30.04.2024 itself has been found to be vitiated rejection of the said application under Section 161 of the Act loses its significance. The order impugned dated 30.04.2024 passed under Section 79(3) of the Act is quashed and set aside - Petition allowed.

Summary

The petition before the Allahabad High Court challenged two orders passed under the GST Act, 2017. The petitioner, a Goods Transport Agency, had its return scrutinized by the tax department for the period April 2018 to March 2019, leading to discrepancies being identified. The petitioner's response to the show cause notices, particularly regarding the Reverse Charge Mechanism (RCM), was not adequately considered by the tax authorities. The Court found that the orders lacked proper reasoning and violated principles of natural justice.**Issues Presented and Considered:**1. Whether the tax authorities adequately considered the petitioner's submissions regarding the Reverse Charge Mechanism (RCM)?2. Whether the orders passed under Section 161 and Section 73(9) of the GST Act were valid and reasoned properly?3. Whether the orders violated principles of natural justice by not providing a proper opportunity of hearing to the petitioner?**Issue-Wise Detailed Analysis:****1. Relevant Legal Framework and Precedents:**The GST Act, 2017 governs the taxation of goods and services in India. The principles of natural justice require that parties be given a fair opportunity to present their case before a decision is made.**2. Court's Interpretation and Reasoning:**The Court noted that the show cause notice and subsequent orders did not adequately address the petitioner's submissions regarding the RCM. The orders were found to be non-speaking and lacked proper reasoning, especially in addressing specific issues raised by the petitioner.**3. Key Evidence and Findings:**The petitioner had submitted detailed responses and documents regarding the RCM, which were not appropriately considered by the tax authorities. The Court highlighted the deficiencies in the orders in addressing these crucial points.**4. Application of Law to Facts:**The Court applied the principles of natural justice and reasoned decision-making to assess the validity of the orders. It found that the orders failed to meet the required standards of proper consideration and reasoning.**5. Treatment of Competing Arguments:**The arguments presented by both parties were considered, with the petitioner emphasizing the RCM aspect and the tax authorities defending their actions. The Court ultimately sided with the petitioner due to the deficiencies in the orders.**6. Conclusions:**The Court concluded that the orders under Section 161 and Section 73(9) of the GST Act were not valid due to their cursory nature and failure to address the petitioner's submissions adequately. The orders were quashed, and the matter was remanded for fresh consideration with a proper opportunity of hearing for the petitioner.**Significant Holdings:**The Court's crucial holding was that the orders lacked proper reasoning, violated principles of natural justice, and failed to address the petitioner's specific submissions regarding the RCM. The Court quashed the orders and remanded the matter for a fresh decision with a proper opportunity of hearing.In conclusion, the Allahabad High Court's judgment in this case emphasized the importance of proper reasoning, adherence to principles of natural justice, and thorough consideration of parties' submissions in administrative decisions under the GST Act.