Department cannot pass an order on the dated personal hearing

[CA Bimal Jain]

The Hon’ble Madras High Court in the case of M/S. SS TRADERS, REPRESENTED BY ITS PROPRIETOR MR. G. DHARUN VERSUS THE JOINT COMMISSIONER (ST) (INTELLIGENCE) , THE STATE TAX OFFICER, ERODE - 2024 (9) TMI 600 - MADRAS HIGH COURT remanded back the order where the Assessee was mulct with huge tax liability vide Assessment Order and the on the date of hearing, 105 pages order was passed which was technically impossible. Therefore, the Order was set aside and was remitted back to pass fresh order.

Facts:

M/s. SS Traders (“the Petitioner”) was engaged in was engaged in the business of Iron and Steel namely Thermo Mechanically Treated (“TMT”) Bar, a type of Steel bar used in construction projects, underground and underwater structures.

They were served Show Cause Notice (“SCN”) dated February 11, 2021 to which the Petitioner replied on March 15, 2021 and requested three weeks-time. Pursuant to the reply, the Revenue Department (“the Respondent-1”) issued a SCN on March 22, 2021 and fixed the personal date of hearing on March 22, 2021. The Petitioner filed a reply on March 31, 2021 and requested fifteen days-time period.

The Joint Commissioner (“the Respondent-2”) issued another SCN on April 07, 2021 and granted final opportunity to the Petitioner for filing objections on or before April 12, 2021 and directed to appear for personal hearing on April 12, 2021.

It was contended that goods were not received by the Petitioner and the Petitioner had not deliberately paid tax from Electronic Cash Register. The Petitioner had wrongly claimed/availed Input Tax Credit (“ITC”).

The Petitioner contended that they cannot be found fault with on account of failure of the supplier to file statutory returns as is contemplated under the respective GST enactments. The supply of goods was directly from the place of storage godown/warehouse and the invoices were directly raised from the branch office of the head office. The Petitioner had also received consideration for the supplies effected and therefore, it cannot be said that no supply was affected.

Lastly, the case was heard on April 12, 2021 and on the same date, the Impugned Order has been passed consisting of 105 pages, which is technically impossible as the Petitioner was fully heard on the said date.

The Respondent-2 without considering the Petitioner’s contentions passed an Assessment Order dated April 12, 2021 (“the Impugned Order”) for the Assessment Year 2017-18.

The Petitioner contended that a portion of the turnover related to pre-GST era and for the remaining portion, the tax liability was paid by the Petitioner on January 11, 2021 along with interest.

Issue:

Whether the Department can pass an order on the same day of hearing?

Held:

The Hon’ble Madras High Court in M/S. SS TRADERS, REPRESENTED BY ITS PROPRIETOR MR. G. DHARUN VERSUS THE JOINT COMMISSIONER (ST) (INTELLIGENCE) , THE STATE TAX OFFICER, ERODE - 2024 (9) TMI 600 - MADRAS HIGH COURT held as under:

• Held that, the Impugned Order is quashed and shall be treated as addendum to SCN dated February 11, 2021 and remitted the case back to the Respondents to pass fresh order where the Petitioner shall deposit 10% of the disputed tax within a period of six weeks and shall file a reply to the Impugned Order. If the Petitioner fails to comply with the conditions, it shall be construed the writ petition was dismissed with liberty to proceed against the Petitioner.

Our Comments:

In legal proceedings, the issuance of an order on the date of the personal hearing can be procedurally questionable. According to principles of natural justice and procedural fairness, an adequate period should be granted after the personal hearing to allow the Adjudicating Authority to review and consider the arguments presented by the parties involved. An immediate order raises concerns about whether the arguments and evidence provided during the hearing were duly considered. This approach could be seen as a prejudgment or a lack of objective assessment, potentially rendering the order arbitrary and in violation of the principles of due process.

In certain cases, if an order is passed without providing reasonable time for deliberation, it could be challenged on grounds of procedural impropriety. Courts have consistently held that a well-reasoned decision is essential, requiring time for thoughtful consideration. Therefore, unless the urgency of the case demands immediate action, passing an order on the same day could be construed as a denial of the right to a fair hearing, and the order may be set aside or remanded for reconsideration upon such grounds.

 (Author can be reached at [email protected])