2025 (6) TMI 2031 - HC - GST

Violation of principles of natural justice - ex-parte order - opportubity of hearing not provided - HELD THAT - Having regard to the financial implication is involved in the light of impugned order. The petitioner s email has not been connected with the GST. That apart the official respondents were required to serve notices and other communications under the GST Act only through email/portal and so also through registered post under acknowledgment due to avoid multiple litigation. The petitioner has made out a case so as to interfere with the impugned decision of the respondent dated 18.01.2024 and it is set aside. Matter is remanded to the concerned authority to undertake afresh exercise after providing ample opportunity of hearing to the petitioner Petition allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

• Whether the order dated 18.01.2024 passed under Section 73(9) of the CGST/BGST Act, 2017, directing the petitioner to pay substantial amounts of CGST, SGST, interest, penalty, and fees, is valid and sustainable.
• Whether the summary of demand issued in form DRC 07 for the recovery of tax under Section 73(9) of the CGST Act, 2017, is legally enforceable.
• Whether the petitioner was afforded a fair and reasonable opportunity of hearing before passing the impugned order.
• Whether the notices issued to the petitioner complied with the procedural requirements under the CGST Act, particularly regarding service through email and registered post.
• Whether coercive recovery actions such as attachment of bank accounts or third-party recovery should be stayed pending adjudication of the writ petition.
• Whether the imposition of tax liability, interest, and penalty on the petitioner by the Respondent is illegal and void due to procedural infirmities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Order under Section 73(9) of the CGST/BGST Act, 2017

Relevant legal framework and precedents: Section 73(9) of the CGST Act empowers the tax authorities to determine tax not paid or short paid and to issue an order demanding payment of tax along with interest and penalty. The law mandates adherence to principles of natural justice, including providing an opportunity to the assessee before passing such orders.

Court's interpretation and reasoning: The Court recognized that the order dated 18.01.2024 imposed a significant financial liability on the petitioner, including tax dues, interest, and penalties. However, the Court emphasized that such orders must be passed after affording the petitioner a proper hearing and following due process.

Key evidence and findings: The petitioner contended that the impugned order was passed without hearing him and that notices were sent to an email address not linked to the GST registration, resulting in non-receipt of notices.

Application of law to facts: The Court noted that the petitioner's email was not connected with the GST registration, which is the official channel for communication under the GST regime. This procedural lapse undermined the validity of the order passed without the petitioner's knowledge or participation.

Treatment of competing arguments: The Respondent argued that notices were sent through email and reminders were issued, and the petitioner's failure to respond does not invalidate the order. The Court rejected this argument, emphasizing the necessity of proper service through official channels to ensure fair opportunity.

Conclusions: The Court held that the impugned order is liable to be set aside due to the failure in providing a fair hearing and improper service of notices.

Issue 2: Legality of the Summary of Demand (Form DRC 07)

Relevant legal framework and precedents: The issuance of summary demand under Section 73(9) must comply with procedural safeguards, including proper communication and opportunity to respond before recovery actions.

Court's interpretation and reasoning: The Court found that the summary demand was issued based on the impugned order, which itself was flawed due to procedural irregularities.

Key evidence and findings: The summary demand was for Rs. 98,28,364/- for recovery of tax. Since the underlying order was set aside, the demand could not stand in its present form.

Application of law to facts: The Court linked the validity of the summary demand directly to the validity of the order passed under Section 73(9). Since the order was quashed, the demand was also set aside.

Treatment of competing arguments: The Respondents maintained that the demand was valid as per law, but the Court prioritized procedural fairness.

Conclusions: The summary demand was quashed along with the impugned order.

Issue 3: Adequacy of Opportunity of Hearing and Service of Notices

Relevant legal framework and precedents: Principles of natural justice under administrative law require that before any adverse order is passed, the affected party must be given a fair opportunity to be heard. Under the CGST Act, notices and communications are to be served through the GST portal/email registered with the GST system or by registered post with acknowledgment due.

Court's interpretation and reasoning: The Court held that since the petitioner's email was not linked to the GST registration, service by email was ineffective. The Respondents were also required to serve notices through registered post with acknowledgment to avoid multiple litigations and ensure proper communication.

Key evidence and findings: The petitioner's assertion that notices were not received was supported by the fact that the email used was not the official GST-registered email.

Application of law to facts: The Court concluded that the failure to serve notices correctly resulted in denial of opportunity to the petitioner, rendering the impugned order unsustainable.

Treatment of competing arguments: The Respondents' reliance on email service and reminders was held insufficient without proper linkage to GST registration and without use of registered post.

Conclusions: The Court mandated that the concerned authority must ensure proper service of notices and provide a full and fair opportunity of hearing in any fresh proceedings.

Issue 4: Stay of Coercive Recovery Actions

Relevant legal framework and precedents: Courts generally restrain tax authorities from taking coercive recovery actions pending adjudication of writ petitions challenging the validity of tax demands, to prevent undue hardship.

Court's interpretation and reasoning: While the Court did not explicitly grant a stay in the operative portion, it directed that the matter be remanded and fresh proceedings be undertaken after proper hearing, implicitly restraining coercive action until completion of the process.

Key evidence