2025 (3) TMI 1174 - HC - GST

Seeking to quash the adjudication order along with the summary of order passed under Section 73 of the KGST Act - reasonable opportunity provided to petitioner to file reply to the SCN or not - removal of attachment of the input tax credit ledger of petitioner - HELD THAT - A perusal of the material on record will indicate that it is an undisputed fact that the petitioner-company did not submit any reply either to the intimation dated 28.11.2023 (Annexure-D) or to the show cause notice dated 08.12.2023 (Annexure-E) issued by the respondent No. 3. So also the petitioner-company did not participate in the impugned proceedings which culminated in the impugned order which is undisputedly an ex-parte adjudication order calling upon the petitioner-company to pay a sum of Rs. 2, 20, 75, 208/- towards tax interest and penalty. However by adopting justice oriented approach and in order to provide one more opportunity to the petitioner-company to submit its reply to the show cause notice and contest the proceedings without expressing any opinion on merits/demerits of the rival contentions it is deemed just and appropriate to set-aside the impugned order and remit the matter back to the respondent No. 3 to the stage of petitioner-company submitting its reply to the show cause notice and to proceed further in accordance with law. Petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the adjudication order dated 12.03.2024 and the endorsement dated 29.01.2025 were issued in violation of the principles of natural justice.
• Whether the petitioner was given a reasonable opportunity to respond to the intimation and show cause notice issued under the CGST Act.
• Whether the attachment of the input tax credit ledger was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Violation of Principles of Natural Justice

• Relevant Legal Framework and Precedents: The principles of natural justice require that a party must be given a fair opportunity to present its case. This includes being informed of the case against them and having the opportunity to respond to it.
• Court's Interpretation and Reasoning: The Court found that the petitioner did not receive the intimation or show cause notice, which led to an ex-parte adjudication order. The Court emphasized the importance of a justice-oriented approach and the need to provide the petitioner with an opportunity to respond.
• Key Evidence and Findings: It was undisputed that the petitioner did not submit any reply to the notices issued by respondent No. 3 and did not participate in the proceedings, resulting in an ex-parte order.
• Application of Law to Facts: Given the lack of participation due to alleged non-receipt of notices, the Court determined that the proceedings were conducted in violation of natural justice principles.
• Treatment of Competing Arguments: While the respondents argued that sufficient opportunity was given, the Court prioritized the petitioner's right to a fair hearing, setting aside the impugned orders.
• Conclusions: The Court concluded that the adjudication order and endorsement were issued without adhering to natural justice principles and thus warranted setting aside.

Opportunity to Respond

• Relevant Legal Framework and Precedents: Under the CGST Act, a taxpayer must be given notice and an opportunity to respond before any adverse order is passed.
• Court's Interpretation and Reasoning: The Court noted the absence of a reply from the petitioner, which was attributed to non-receipt of notices. It stressed the need for procedural fairness.
• Key Evidence and Findings: The petitioner claimed non-receipt of both the intimation and show cause notice, which was not effectively countered by the respondents.
• Application of Law to Facts: The Court applied the principle that a taxpayer should be allowed to present their case before any adverse decision is made.
• Treatment of Competing Arguments: The respondents' argument about the petitioner's lack of diligence was not sufficient to override the need for ensuring a fair opportunity to respond.
• Conclusions: The Court decided to remit the matter back to provide the petitioner with a chance to respond to the show cause notice.

Attachment of Input Tax Credit Ledger

• Relevant Legal Framework and Precedents: The attachment of assets like the input tax credit ledger should be justified and proportionate to the circumstances.
• Court's Interpretation and Reasoning: The Court found that without a fair hearing, such an attachment was premature and not justified.
• Key Evidence and Findings: The attachment was part of the impugned proceedings, which were found to be conducted without proper notice to the petitioner.
• Application of Law to Facts: The Court determined that the attachment should be revoked pending a fair hearing.
• Treatment of Competing Arguments: The Court did not find the respondents' justifications for the attachment compelling in the absence of a fair process.
• Conclusions: The Court ordered the revocation of the attachment order.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: The Court emphasized a "justice-oriented approach" and the need to "provide one more opportunity to the petitioner-company to submit its reply to the show cause notice and contest the proceedings."
• Core principles established: The judgment reinforced the principles of natural justice, ensuring that parties are given a fair opportunity to be heard before any adverse orders are made.
• Final determinations on each issue: The Court allowed the petition, set aside the impugned adjudication order and endorsement, remitted the matter back for reconsideration, directed the revocation of the attachment order, and granted the petitioner liberty to submit a reply to the show cause notice.