2025 (4) TMI 1502 - HC - GST

Violation of principles of natural justice - non-communication of show cause notices and absence of personal hearing - HELD THAT - There is no dispute on the aspect that notices which culminated in the impugned order were merely uploaded in the GST portal which were unnoticed by the petitioner as the petitioner had no occasion to view the Portal then and there hence the petitioner could not file reply or appear for the personal hearing. However the first respondent passed the impugned orders without even affording any opportunity of hearing to the petitioner which are nothing but an ex parte order as the same suffers from violation of principles of natural justice. Thus once the orders are passed in violation of principles of natural justice this Court cannot impose any condition requiring the petitioner to make any deposit however considering the fact that 22% of the disputed tax has already been paid by the petitioner and the petitioner has voluntarily come forward to deposit Rs. 15, 000/- this Court is inclined to set aside the impugned order and remand the matter for fresh consideration. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether the impugned order passed under section 73 of the Tamil Nadu Goods and Service Tax Act 2017/Central Goods and Service Tax Act 2017 suffers from violation of principles of natural justice due to non-communication of show cause notices and absence of personal hearing.

- Whether uploading of show cause notices and personal hearing notices solely on the GST portal without direct communication to the petitioner suffices to constitute valid service.

- Whether an ex parte order passed without affording the petitioner an opportunity to be heard can be sustained.

- The appropriate relief and procedural directions to be issued in light of the violation of natural justice principles.

- The treatment of the voluntary partial payment of disputed tax by the petitioner in the context of setting aside the impugned order and remanding the matter.

- The status and treatment of the bank attachment order issued against the petitioner in connection with the disputed tax demand.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice Due to Non-Communication and Absence of Hearing

Relevant Legal Framework and Precedents: The principles of natural justice, including the right to be heard (audi alteram partem), are fundamental to administrative and quasi-judicial proceedings. Section 73 of the Tamil Nadu GST Act and Central GST Act empowers authorities to recover tax demands after issuing show cause notices and providing an opportunity for personal hearing. Precedents establish that mere mechanical or technical compliance with notice requirements, without effective communication and hearing, violates natural justice.

Court's Interpretation and Reasoning: The Court observed that all show cause notices and personal hearing notices were uploaded only on the GST portal under the "View Additional Notices Tab." The petitioner did not have actual knowledge of these notices and thus could not file replies or appear for hearings. The first respondent passed the impugned order without affording any hearing, rendering the order ex parte and violative of natural justice.

Key Evidence and Findings: The record showed absence of any direct communication or personal service of notices to the petitioner. The petitioner's inability to access or notice the uploaded documents on the portal was uncontroverted. The impugned order was passed on 26.06.2023 without any reply or hearing from the petitioner.

Application of Law to Facts: The Court applied the principle that service of notice must be effective and must enable the party to present its case. Uploading on a portal without ensuring actual notice or knowledge is insufficient. Passing an order without hearing in such circumstances violates natural justice.

Treatment of Competing Arguments: The respondents did not dispute the factual position regarding the mode of communication but relied on the technical compliance of uploading notices on the portal. The Court rejected this argument, emphasizing the need for actual opportunity to be heard.

Conclusions: The impugned order is set aside as it was passed in violation of natural justice principles due to failure to afford the petitioner an opportunity of hearing.

Issue 2: Validity of Service of Notices by Uploading on GST Portal

Relevant Legal Framework and Precedents: Service of notices in tax proceedings must comply with statutory provisions and principles of natural justice. While electronic service is recognized, it must ensure that the recipient has actual knowledge or reasonable opportunity to access the notice.

Court's Interpretation and Reasoning: The Court noted that mere uploading of notices on the portal without informing the petitioner or ensuring access does not amount to valid service. The petitioner had no occasion to view the portal at the relevant time, resulting in non-receipt of notices.

Application of Law to Facts: The Court held that valid service requires more than passive uploading; it must be accompanied by active communication or confirmation of receipt to ensure the party is aware of the proceedings.

Conclusions: The mode of service adopted by the respondents was inadequate and did not satisfy legal requirements, contributing to the violation of natural justice.

Issue 3: Effect of Voluntary Partial Payment of Disputed Tax on Relief and Directions

Relevant Legal Framework and Precedents: Courts have discretion to consider voluntary payments made by petitioners in tax disputes when granting interim relief or remanding matters for fresh consideration.

Court's Interpretation and Reasoning: The petitioner had already paid 22% of the disputed tax and expressed willingness to deposit an additional Rs. 15,000/-. The respondents fairly submitted that this fact be taken into account.

Application of Law to Facts: Although the Court held that no deposit condition can be imposed when orders are set aside for violation of natural justice, it considered the voluntary payment as a factor in framing directions for fresh proceedings.

Conclusions: The Court allowed the petitioner liberty to deposit Rs. 15,000/- within two weeks and directed fresh consideration of the matter after providing opportunity to file replies and personal hearing.

Issue 4: Remand and Procedural Directions for Fresh Consideration

Court's Interpretation and Reasoning: Given the violation of natural justice and invalid service, the Court remanded the matter to the first respondent for fresh consideration. The Court directed that the petitioner be afforded a clear 14-day notice for personal hearing after filing a reply with supporting documents.

Application of Law to Facts: The Court emphasized that the first respondent must decide the matter in accordance with law after affording proper opportunity to the petitioner, ensuring compliance with natural justice.

Conclusions: The impugned order and associated documents were set aside, and the matter remanded with clear procedural safeguards.

Issue 5: Treatment of Bank Attachment Order

Court's Interpretation and Reasoning: The petitioner's bank account was attached in connection with the disputed tax demand. The Court directed that upon proof of payment of Rs. 15,000/-, the respondent department must issue directions to the petitioner's banker to de-freeze the account forthwith.

Conclusions: The Court ensured that the petitioner's rights be protected pending fresh adjudication and that the bank attachment be lifted upon payment proof.

3. SIGNIFICANT HOLDINGS

- "The first respondent passed the impugned orders without even affording any opportunity of hearing to the petitioner, which are nothing but an ex parte order, as the same suffers from violation of principles of natural justice."

- Mere uploading of notices on the GST portal without ensuring actual