2022 (5) TMI 785 - HC - GST

Violation of principles of natural justice - allegation that the petitioner has committed fraud and claimed input tax credit without movement of the vehicle through the check post. - case of petitioner is that the impugned proceedings came to be issued without furnishing the material relied upon by the authority concerned while directing the petitioner to pay tax - HELD THAT - From the judgment of the Division Bench in BGR Energy Systems Limited v. Assistant Commissioner, Commercial Taxes, Large Tax Payer Unit 2009 (4) TMI 850 - ANDHRA PRADESH HIGH COURT , it is very clear that a person proceeding must know that he is required to meet the allegations, which may lead to certain action being taken against him. Apart from that the Bench also held that an opportunity must be given to enable to controvert correct or comment on the evidence or information that may be relevant to the decision. A notice which does not mention the particulars, on which the case against the person is based, cannot provide a foundation for the proceedings that follow. As the order impugned herein refers to Exs.P1 and P2, which were never supplied to the petitioner at any point of time, it can be said without hesitation that the same will be in violation of principles of natural justice. It may be true that the petitioner has committed a grave offence but any order passed without providing an opportunity to defend his case would be in violation of the procedure established by law. The matters are remanded back to the 4th respondent to deal with the same afresh after furnishing the material relied upon and after giving an opportunity of personal hearing to the petitioner - Petition allowed by way of remand.

Summary

Issues:
1. Challenge to impugned order under Central Goods and Services Tax Act 2017 and State Goods and Services Tax Act 2017.
2. Challenge to the action of conducting an auction to recover outstanding amounts under CGST and SGST.
3. Allegations of tax evasion and fraudulent activities.
4. Violation of principles of natural justice in the assessment proceedings.

Issue 1 - Challenge to Impugned Order:
The petitioner sought relief through a writ petition under Article 226 of the Constitution of India to quash the impugned order of the 1st Respondent dated 21.1.2021 under the Central Goods and Services Tax Act 2017 and State Goods and Services Tax Act 2017. The petitioner argued that the order was illegal, arbitrary, and in violation of principles of natural justice as the material relied upon by the authority was not furnished to the petitioner. The Court noted the requirement of providing material relied upon to the petitioner under Section 75(7) of the Act and emphasized the importance of adhering to principles of natural justice in such proceedings.

Issue 2 - Challenge to Auction Notice:
Another writ petition was filed challenging the action of the 5th Respondent in issuing a notice proposing to conduct an auction of the petitioner's premises to recover outstanding amounts under CGST and SGST. The petitioner sought a writ of mandamus to declare the action illegal, arbitrary, and unjustified. The Court considered the allegations of tax evasion and fraudulent activities, emphasizing the need for a fair hearing and the right to know the grounds for any action proposed against the petitioner.

Issue 3 - Allegations of Tax Evasion:
The Government Pleader for Commercial Tax argued that the petitioner had committed fraud by claiming input tax credit without proper documentation. The authority relied on evidence from Toll Plaza data to support the allegations of tax evasion. The Court examined the evidence presented, including the registration details and movements of vehicles, to assess the validity of the claims made against the petitioner.

Issue 4 - Violation of Principles of Natural Justice:
The Court analyzed the arguments presented by both parties regarding the violation of principles of natural justice in the assessment proceedings. The petitioner contended that the order was passed without furnishing the material relied upon by the authority, which was essential for a fair hearing. The Court referred to previous judgments emphasizing the right to a fair hearing, including the requirement to provide precise notice and particulars of the case to be met by the party concerned. The Court concluded that the orders impugned were set aside, and the matters were remanded for fresh consideration by the authority after providing the petitioner with the material relied upon and an opportunity for a personal hearing.

In conclusion, the High Court allowed the writ petitions, set aside the impugned orders, and remanded the matters back to the authority for fresh consideration while emphasizing the importance of adhering to principles of natural justice in tax assessment proceedings.