2025 (6) TMI 2034 - HC - GST

Violation of principles of natural justice - non-service of notice - proceedings initiated without serving notice - HELD THAT - This Court finds force in submission of learned counsel for the Petitioner that because of non-service of notices issued from Commissionerate at Rourkela confusion arose. As is seemly submitted it is trite that at one and the same time only one operative assessment order can subsist. In other words no two assessment orders for the same tax periods/financial years can be operative at the same time. It is axiomatic that there may exist one assessment order for an assessee for one assessment period. The proceedings without serving notice culminated in assessment order dated 02.07.2024 is wholly without jurisdiction and a nullity. Since the assessment order dated 12.07.2024 was passed by taking into consideration material produced and affording opportunity of personal hearing this Court is inclined to hold that decision taken on compliance of principles of natural justice and on merits is tenable particularly when the same is not questioned before any other forum and attained finality. Such finding is made on the conceded position by counsel for both sides that the order dated 12.07.2024 has not been assailed before any other higher forum. The rationale behind this principle is rooted in the principles of natural justice and fairness. A taxpayer should have the opportunity to present his case. If an ex-parte order is issued and subsequently an order on merits is passed the latter which considers the taxpayer s submissions should prevail - There cannot be any cavil that justice dictates that a person who had no opportunity to defend themselves against the making of an order should not be placed in a worse position than they would have been in had they been able to fully participate in the proceedings leading to the order. A decision therefore made after hearing is more authoritative than a default decision. This Court is therefore inclined to entertain this writ petition by quashing the ex-parte Assessment Order - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether an ex-parte assessment order passed without service of notice on the petitioner for the same financial years can be sustained when another assessment order for the identical periods was passed after affording opportunity of hearing and considering the petitioner's submissions.

- Whether two assessment orders for the same assessment period and on the same subject matter can simultaneously subsist and be operative.

- Whether the principles of natural justice and fairness are violated by passing an ex-parte assessment order without proper service of notice.

- The jurisdictional validity and legal effect of the ex-parte assessment order passed by the Commissioner, GST & CX Commissionerate, Rourkela.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of ex-parte assessment order passed without service of notice

Relevant legal framework and precedents: The assessment proceedings were conducted under Section 73 of Chapter V of the Finance Act, 1994, which governs the determination of service tax demand. The principles of natural justice mandate that notice must be served on the assessee and an opportunity to be heard must be provided before passing any adverse order. The judgment referred to in the case of CCE vs. Prince Gutkha Ltd. (2015) 15 SCC 775, emphasizes that a second show-cause notice or assessment on the same cause of action without proper basis is impermissible.

Court's interpretation and reasoning: The Court found that the ex-parte order dated 02.07.2024 passed by the Commissioner, GST & CX Commissionerate, Rourkela was issued without service of notice to the petitioner, as evidenced by the postal department's endorsement "assessee cannot be located" (Annexure-4). This resulted in the petitioner not appearing or participating in the proceedings, leading to the ex-parte order. The Court held that such an order was passed without jurisdiction and is a nullity because it violated the mandatory requirement of service of notice and the principles of natural justice.

Key evidence and findings: The acknowledgment receipt (Annexure-4) clearly indicated non-service of notice. The petitioner's non-appearance was due to non-receipt of notice, not willful avoidance. The ex-parte order was passed solely on that basis, without examination of petitioner's documents or evidence.

Application of law to facts: The Court applied the principles of natural justice and the statutory mandate requiring service of notice before assessment. The absence of notice vitiated the ex-parte order, rendering it legally unsustainable.

Treatment of competing arguments: The Opposite Parties contended that notices were issued and the petitioner chose not to appear, justifying the ex-parte order. However, the Court rejected this argument based on the postal endorsement and lack of evidence of proper service, emphasizing that non-service cannot be equated with non-appearance.

Conclusions: The ex-parte order dated 02.07.2024 is without jurisdiction and is quashed.

Issue 2: Co-existence and precedence of two assessment orders for the same financial years

Relevant legal framework and precedents: It is a settled principle that only one operative assessment order can subsist for the same assessment period and subject matter. Multiple assessment orders for the same period create legal uncertainty and are impermissible. The Court referred to the principle that an order passed after hearing and on merits takes precedence over an ex-parte order.

Court's interpretation and reasoning: The Court observed that the assessment order dated 12.07.2024 passed by the Commissioner, CGST & CX (Audit), Nashik was passed after affording the petitioner an opportunity of hearing and considering the merits of the case. This order was not challenged before any other forum and had attained finality. In contrast, the ex-parte order dated 02.07.2024 was passed without hearing and without service of notice. The Court held that the order passed on merits must prevail over the ex-parte order.

Key evidence and findings: The order dated 12.07.2024 (Annexure-3) reflected participation by the petitioner and consideration of evidence, whereas the ex-parte order (Annexure-1) was passed in absence of the petitioner.

Application of law to facts: The Court applied the principle that only one assessment order can be operative and that an order passed after hearing and on merits is preferred over an ex-parte order. This is consistent with the principles of natural justice and fairness.

Treatment of competing arguments: The Opposite Parties did not dispute the existence of two orders but justified the ex-parte order due to non-appearance. The Court rejected this justification because non-service of notice was established.

Conclusions: The assessment order dated 12.07.2024 is operative and binding, while the ex-parte order dated 02.07.2024 is quashed.

Issue 3: Application of principles of natural justice and fairness

Relevant legal framework and precedents: The principles of natural justice require that a person should have an opportunity to present their case before adverse orders are passed. The Court cited the principle that a person who had no opportunity to defend themselves should not be placed in a worse position than if they had participated.

Court's interpretation and reasoning: The Court emphasized that the ex-parte order violated these principles because the petitioner was not given notice and hence no chance to defend or present evidence. The subsequent order passed after hearing is consistent with natural justice and is therefore valid.

Key evidence and findings: The lack of service of notice and the petitioner's participation in the later assessment proceedings.

Application of law to facts: The Court applied the natural justice principles to invalidate the ex-parte order and uphold the order passed after hearing.

Treatment of competing arguments: The Opposite Parties' argument that the petitioner deliberately avoided appearance was rejected due to lack of proper service.

Conclusions: Natural justice mandates quashing of the ex-parte order and sustaining the order passed after hearing.

3. SIGNIFICANT HOLDINGS

"It is trite that at one and the same time only one operative assessment order can subsist. In other words, no two assessment orders for the same tax periods/financial years can be operative at the same time. It is axiomatic that there may exist one assessment order for an assessee for one assessment period. The proceedings without serving notice culminated in assessment order dated 02.07.2024 is wholly without jurisdiction and a nullity."

"When multiple assessment orders exist for the same assessment year in respect of same assessee with respect to identical subject-matter, the order that addresses the merits of the case generally takes precedence over an ex-parte order. This is because an ex-parte order is typically made without considering the taxpayer's arguments, evidence, or objections/explanation, if any. The order based on merit reflects application of mind in decision making and thorough examination of the facts and law being made, such order is preferred to be sustained rather than the order which is passed in absence of the assessee for want of service of notice."

"There cannot be any cavil that justice dictates that a person who had no opportunity to defend themselves against the making of an order should not be placed in a worse position than they would have been in had they been able to fully participate in the proceedings leading to the order. A decision, therefore, made after hearing is more authoritative than a default decision."

Final determinations:

- The ex-parte assessment order dated 02.07.2024 passed by the Commissioner, GST & CX Commissionerate, Rourkela is quashed as it was passed without service of notice and without jurisdiction.

- The assessment order dated 12.07.2024 passed by the Commissioner, CGST & CX (Audit), Nashik is valid, binding, and operative as it was passed after affording opportunity of hearing and considering the merits.

- The parties are directed to act in accordance with the assessment order dated 12.07.2024.