2025 (7) TMI 832 - HC - GST

Dismissal of petitioner s appeal under Section 107(1) of the Central Goods and Services Tax Act 2017 solely on the ground of delay - legality and propriety of the adjudication order passed by respondent No. 3 - Simultaneous power to conduct Audit and pass order on the same subject matter which was pending in Appeal - HELD THAT - It is evident from the impugned order dated 29.04.2025 that the appellate authority has dismissed the appeal solely on the ground of delay without considering the period spent by the petitioner in bona fide prosecution of proceedings before this Court which ought to have been excluded under Section 14 of the Limitation Act. The failure to give effect to the exclusion of time as mandated under Section 14 despite a clear direction from this Court amounts to not only an erroneous exercise of jurisdiction but also a contravention of the judicial discipline expected of statutory authorities. The order of respondent No. 1 is rendered unsustainable in law. On this short but significant ground alone the impugned appellate order is liable to be quashed and the matter requires to be remanded for reconsideration in accordance with law keeping in view the benefit under Section 14 of the Limitation Act and the liberty granted by this Court. The critical question that arises is whether the Assistant Commissioner of Commercial Taxes (Audit)-6.3 DGSTO-respondent No. 3 could have simultaneously exercised jurisdiction and proceeded to pass a separate order vide Annexure F pertaining to the same subject matter despite the pendency of appeal proceedings before respondent No. 1 - The Hon ble Supreme Court and various High Courts have time and again held that once an appeal is entertained any collateral or parallel adjudication on the same cause of action by another authority must be avoided as it defeats the purpose of the statutory remedy and offends principles of natural justice judicial discipline and fair procedure. In the present case the order passed by respondent No. 3 despite full knowledge of the pending appeal and judicial directions is arbitrary and legally unsustainable and is therefore liable to be quashed. Petition allowed.

Summary

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

(i) Whether the dismissal of the petitioner's appeal under Section 107(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) on the sole ground of delay is legally sustainable, especially when the delay is attributed to defective or non-service of the adjudication order;

(ii) Whether the limitation period for filing the appeal commences from the date of service of the adjudication order or from the date the petitioner actually acquires knowledge of the order, particularly in cases of defective service;

(iii) Whether the appellate authority was obliged to consider the benefit of Section 14 of the Limitation Act, 1963, which excludes the time during which the petitioner was bona fide prosecuting proceedings before the Court, in computing the limitation period;

(iv) Whether the adjudication order passed by respondent No. 3 in the face of pending appeal proceedings before respondent No. 1 was jurisdictionally proper or amounted to an impermissible parallel proceeding;

(v) Whether the procedural safeguards, including reasonable opportunity of hearing and proper communication of orders, were adhered to in the passing of the impugned adjudication order by respondent No. 3.

Issue-wise Detailed Analysis

1. Legality of dismissal of appeal on ground of delay under Section 107(1) of the CGST Act

The relevant legal framework includes Section 107(1) of the CGST Act, which provides the right to appeal against certain orders within a prescribed time limit, and Section 14 of the Limitation Act, 1963, which excludes from the limitation period the time during which the appellant was prosecuting another proceeding bona fide.

The Court noted that the appellate authority dismissed the appeal solely on the ground of delay without considering whether the delay was caused by defective service of the adjudication order. The petitioner contended that the order was not communicated in a manner known to law, and thus the limitation period did not commence. The Court relied on settled judicial principles that where an order is not duly served, the limitation period cannot start running against the affected party.

The petitioner also relied on the proviso to Section 169 of the CGST Act, which prescribes modes of service of orders and notices, emphasizing that proper service is a prerequisite for the limitation to begin. The Court observed that the appellate authority failed to consider these aspects and did not apply the benefit of Section 14 of the Limitation Act, despite the petitioner's bona fide prosecution of earlier proceedings before the High Court.

The Court found that the appellate authority's failure to exclude the period during which the petitioner was engaged in bona fide proceedings before the High Court, as expressly directed by the Court in earlier orders, amounted to an erroneous exercise of jurisdiction and contravened judicial discipline.

Consequently, the Court held that the dismissal of the appeal solely on the ground of delay was unsustainable in law and required quashing.

2. Commencement of limitation period and effect of defective service

The Court examined whether the limitation period for filing an appeal begins from the date of passing the order or from the date the order is duly served on the party. The petitioner's case was that the order was not properly served and that the petitioner only came to know of it belatedly.

Relying on the statutory provisions and judicial precedents, the Court underscored that limitation cannot run against a party unaware of the order due to defective service. The Court emphasized that the date of knowledge of the order is critical for computing limitation.

The Court also referred to the proviso to Section 169 of the CGST Act, which mandates proper modes of service, and held that in the absence of proper service, the limitation period does not commence.

3. Application of Section 14 of the Limitation Act, 1963

Section 14 of the Limitation Act excludes from the limitation period the time during which the appellant was bona fide prosecuting another proceeding in a Court of law, provided such proceeding was not instituted for delay.

The Court noted that in an earlier round of litigation, it had granted liberty to the petitioner to avail appellate remedy and had directed the appellate authority to consider the benefit of Section 14 in computing limitation. Despite this, the appellate authority failed to apply this principle in the impugned order.

The failure to exclude the period during which the petitioner was engaged in bona fide proceedings before the Court was held to be a serious error, warranting interference.

4. Jurisdictional propriety of parallel adjudication order passed by respondent No. 3

The petitioner challenged the order passed by respondent No. 3 while the appeal before respondent No. 1 was pending, contending that such parallel proceedings are impermissible and undermine the appellate process.

The Court referred to the settled legal principle that once an appellate authority is seized of a matter, parallel adjudication on the same cause of action by another authority is improper, as it leads to multiplicity of proceedings and jurisdictional overlap.

Judicial precedents from the Supreme Court and various High Courts were cited to reinforce that collateral or parallel adjudication during pendency of appeal offends principles of natural justice and judicial discipline.

The Court held that the order passed by respondent No. 3 was arbitrary and legally unsustainable, and liable to be quashed.

5. Procedural fairness and communication of orders

The petitioner contended that the order passed by respondent No. 3 was without affording reasonable opportunity of hearing and was not communicated properly.

The Court noted that procedural fairness is a fundamental requirement and non-communication or defective service of orders deprives the affected party of the opportunity to exercise statutory rights, including filing appeals.

The Court found merit in the petitioner's contention that the impugned order suffered from procedural infirmities and that the appellate authority should have considered these aspects.

Significant Holdings

The Court held:

"The appellate authority has dismissed the appeal solely on the ground of delay, without considering the period spent by the petitioner in bona fide prosecution of proceedings before this Court, which ought to have been excluded under Section 14 of the Limitation Act. The failure to give effect to the exclusion of time as mandated under Section 14, despite a clear direction from this Court, amounts to not only an erroneous exercise of jurisdiction but also a contravention of the judicial discipline expected of statutory authorities."

It was established that defective or non-service of an adjudication order precludes the commencement of limitation for filing appeal, and the date of knowledge of the order is decisive.

The Court emphasized that once an appellate authority is seized of the matter, parallel adjudication by another authority on the same subject matter is jurisdictionally improper and legally unsustainable.

Accordingly, the impugned appellate order dismissing the appeal on the ground of delay was quashed, and the matter was remanded for fresh consideration applying the benefit of Section 14 of the Limitation Act and considering the petitioner's bona fide prosecution of earlier proceedings.

The order passed by respondent No. 3 was also set aside due to jurisdictional impropriety and procedural infirmities.