2025 (4) TMI 1511 - HC - GST

Violation of principles of natural justice - non-communication and denial of opportunity to the Petitioner - Condonation of delay in filing an appeal - Cancellation of GST registration - HELD THAT - Under Section 107 of the Act the limitation prescribed for challenging an order is three months from the date on which the said decision or order is communicated to the concerned persons. In the present case however a substantial demand has been raised against the Petitioner and for whatever reason the Petitioner has not had an opportunity to either file a reply or to attend a personal hearing. The Petitioner ought to have been a little more cautious with the proceedings. In fact the address of the Petitioner which is mentioned in the memo of parties is also the old place in Delhi. However ld. counsel for the Petitioner submits that the Petitioner has now shifted to Noida. Since the grounds for seeking permission to file the appeal against the order was that the Petitioner did not have knowledge of the SCN and the subsequent proceedings arising therefrom this Court while exercising jurisdiction under Article 226 of the Constitution of India is of the opinion that an opportunity ought to be afforded to the Petitioner to assail the order on merits - Accordingly let the Petitioner file an appeal before the Appellate Authority under Section 107 of the Act within a period of 30 days. Petiton disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the demand order dated 17th August 2024, imposing a liability of Rs. 1,28,13,505/- under Section 73 of the Delhi Goods and Services Tax Act, 2017, against the Petitioner is liable to be quashed on grounds of non-communication and denial of opportunity to the Petitioner.

- Whether the Show Cause Notice dated 21st May 2024 was effectively served upon the Petitioner, and if non-receipt of the same justifies condonation of delay in filing an appeal.

- Whether the limitation period prescribed under Section 107 of the Act for challenging the impugned order can be extended in view of the Petitioner's plea of ignorance of the proceedings.

- Whether the Petitioner was accorded adequate opportunity of personal hearing and to file a reply before passing the ex parte demand order.

- The applicability of principles of natural justice and procedural fairness in tax adjudication proceedings under the Delhi GST Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Demand Order under Section 73 of the Delhi GST Act

The legal framework governing the issuance of demand orders under the Delhi GST Act, 2017, mandates issuance of a Show Cause Notice (SCN) and an opportunity to the assessee to reply and be heard before any demand is finalized. Section 73 specifically deals with determination of tax not paid or short paid due to reasons other than fraud or willful misstatement.

The Court noted that the demand order dated 17th August 2024 was passed ex parte on the ground that the Petitioner neither filed a reply nor appeared for personal hearing. The order recorded that opportunity was given, but the Petitioner remained absent.

However, the Petitioner contended that the SCN dated 21st May 2024 was never brought to its knowledge, as it was uploaded on the GST portal, which the Petitioner did not access. The Petitioner further asserted that the address mentioned in the record was outdated, and the firm had shifted to Noida, which contributed to non-receipt of any physical communication.

The Court observed that the GST portal had undergone changes in January 2024, and the Respondents denied any procedural lapse in uploading the notice. Yet, the Petitioner's non-awareness of the SCN and the subsequent order was a significant factor.

Applying the principles of natural justice, the Court emphasized that the Petitioner ought to have been given a meaningful opportunity to contest the demand on merits. The absence of actual knowledge of the SCN and failure to access the portal raised a question of fairness in the proceedings.

Issue 2: Service and Communication of Show Cause Notice and Limitation for Appeal

Section 107 of the Delhi GST Act prescribes a limitation of three months from the date of communication of the order to file an appeal. The Respondents argued that the limitation period had expired, and the Petitioner's appeal was time-barred.

The Petitioner argued that the order and SCN were never effectively communicated, and the first knowledge of the demand order came only on 29th January 2025, when the Petitioner accessed the GST portal by chance. Consequently, the Petitioner could not file the appeal within the prescribed period.

The Court analyzed the interplay between the statutory limitation and the requirement of proper communication. It held that limitation runs from the date of communication, which presupposes actual knowledge or effective notice to the concerned party.

Given the circumstances that the Petitioner had no actual knowledge of the SCN and subsequent order, the Court held that the limitation period should not operate harshly to deprive the Petitioner of an opportunity to challenge the order on merits.

Issue 3: Opportunity of Personal Hearing and Filing of Reply

The Respondents contended that the Petitioner was given an opportunity for personal hearing and filing of reply, but did not avail the same.

The Petitioner disputed this, stating that since the SCN was not known to it, it could not respond or appear. The Court noted that the order itself recorded non-appearance and non-filing of reply, but also acknowledged that the Petitioner's ignorance of the proceedings was a critical factor.

The Court underscored that procedural fairness requires that the Petitioner be given an opportunity to be heard in a meaningful manner, which was not possible without knowledge of the SCN and order.

Issue 4: Effect of Change of Address and Due Diligence

The Petitioner admitted that the address mentioned in the memo of parties was the old address in Delhi, whereas the firm had shifted to Noida. The Court observed that the Petitioner ought to have been more cautious in updating its address and monitoring the proceedings.

However, the Court balanced this against the Respondents' duty to ensure proper communication and the Petitioner's right to be heard.

3. SIGNIFICANT HOLDINGS

- "In the present case, however, a substantial demand has been raised against the Petitioner and for whatever reason, the Petitioner has not had an opportunity to either file a reply or to attend a personal hearing."

- "Since the grounds for seeking permission to file the appeal against the order was that the Petitioner did not have knowledge of the SCN and the subsequent proceedings arising therefrom, this Court, while exercising jurisdiction under Article 226 of the Constitution of India is of the opinion that an opportunity ought to be afforded to the Petitioner to assail the order on merits."

- The Court held that the limitation period under Section 107 of the Act shall not operate as a bar if the appeal is filed within 30 days from the date of this order, given the Petitioner's lack of knowledge of the SCN and demand order.

- The Court established the principle that "actual knowledge" or effective communication of the notice and order is essential before limitation begins to run, especially in tax proceedings where large demands are raised.

- The Court emphasized the requirement of adherence to principles of natural justice, including the right to be heard, in tax adjudication proceedings.

- The Court directed that the appeal filed by the Petitioner within 30 days shall be adjudicated on merits and in accordance with law, thereby preserving the Petitioner's substantive rights despite procedural lapses.