2020 (11) TMI 713 - HC - GST

Principles of Natural Justice - validity of Garnishee Notice - whether the Garnishee Notice issued by the 1st Respondent is in tune with the principles of natural justice? - HELD THAT - As the Garnishee Notice came to be passed without hearing, the Writ Petition is allowed setting aside the impugned Garnishee Notice, issued by the 1st Respondent, however, leaving it open to the authorities to proceed in accordance with law. Petition closed.

Summary

Issues:
1. Legality of Garnishee Notice under GST Act
2. Imposition of penalty without following proper procedure
3. Compliance with principles of natural justice in recovery proceedings

Issue 1: Legality of Garnishee Notice under GST Act
The petitioner, a registered company under the Companies Act engaged in manufacturing and sale of beverages, challenged a Garnishee Notice issued by the 1st Respondent as illegal, improper, and incorrect. The notice demanded payment of various amounts including tax, interest, penalty, and late fees under the CGST Act. The petitioner contended that the tax liability was cleared, and discrepancies in returns were explained. The court found that the Garnishee Notice was issued without proper hearing, contrary to natural justice principles. The court allowed the writ petition, setting aside the impugned notice, but left room for authorities to proceed lawfully.

Issue 2: Imposition of penalty without following proper procedure
The petitioner argued that the penalty imposed without following the procedure under Sections 73 and 74 of the CGST Act was illegal. The Revenue contended that the petitioner failed to pay GST liabilities and file returns on time, leading to recovery actions. The court noted that penalties were imposed without giving proper notice or opportunity to the petitioner, which was deemed incorrect. The court highlighted the necessity of following due process before imposing penalties under the GST Act.

Issue 3: Compliance with principles of natural justice in recovery proceedings
The court scrutinized the timeline of recovery proceedings for different periods and found instances where notices were issued before the prescribed deadlines for explanations or appeals. The court observed that initiating recovery actions before allowing sufficient time for responses violated principles of natural justice. Specifically, the court noted discrepancies in the handling of recovery processes for different periods, emphasizing the need for authorities to adhere to procedural fairness and timelines. The court emphasized the importance of affording parties adequate time and opportunities to respond before taking coercive recovery measures.

In conclusion, the High Court of Andhra Pradesh held that the Garnishee Notice was issued without proper hearing and set it aside while emphasizing the importance of following legal procedures and principles of natural justice in tax recovery proceedings. The judgment serves as a reminder of the significance of procedural fairness and adherence to statutory requirements in tax matters.