2025 (7) TMI 836 - HC - GST

Violation of principles of natural justice - impugned order passed on the same day without considering the appellant s reply and without providing an opportunity of hearing or without demanding details/documents for forming an opinion against the appellant - demand of tax with interest and penalty - HELD THAT - From the perusal of the documents filed with the writ petition and order dated 08.04.2024 it is very much clear that the reply filed by the appellant on 08.04.2024 has been duly considered by the Assessing Authority and prior to the passing of the impugned order the Assessing Authority has provided proper opportunity of hearing to the appellant and as such the plea taken by the appellant in the writ petition is not correct and judgments relied by the appellant are no assistance. When the appellant/writ petitioner has an alternative efficacious remedy as stated above there was no reason for the appellant to approach this Court in a haste. The learned Single Judge has already granted liberty to the appellant to file an appeal before the concerned appellate authority according to the provisions of the Act within 30 days from the date of receipt of a copy of the order and it has further been directed that the same shall be decided by the appellate authority in accordance with law within a reasonable period of time without raising objection to limitation. The appeal stands dismissed.

Summary

The core legal questions considered in this judgment are:

1. Whether the order imposing tax demand, interest, and penalty on the appellant was passed in violation of the principles of natural justice, particularly regarding the right to a hearing under Section 75(4) of the CGST Act.

2. Whether the issuance of the second show cause notice (SCN-2) introducing new allegations after the extended timeline under Section 73 of the CGST Act and related notifications was legally valid.

3. Whether the appellant had an alternative efficacious statutory remedy available and whether the writ petition was maintainable without exhausting such remedies.

Issue-wise Detailed Analysis

1. Violation of Principles of Natural Justice and Right to Hearing

Relevant Legal Framework and Precedents: Section 75(4) of the CGST Act mandates that before passing any order in response to a show cause notice, the assessing authority must provide an opportunity of hearing to the assessee. The appellant relied on precedents such as Netcore Solution Pvt. Ltd, Sree Constructions, Basheer Bags, and Magadh Sugar & Energy Ltd., which emphasize adherence to natural justice and the requirement of a fair hearing before adverse orders are passed.

Court's Interpretation and Reasoning: The appellant contended that the impugned order dated 08.04.2024 was passed without considering the detailed reply submitted on the same day against SCN-2 and without granting any opportunity of hearing, thereby violating natural justice. The appellant also argued that SCN-2 introduced new allegations not mentioned in SCN-1 or the initial FORM ASMT-10 notice, further necessitating a fresh hearing.

Key Evidence and Findings: The appellant's submissions and documents indicate that replies were filed against both SCN-1 and SCN-2, with requests for extensions and adjournments. The appellant asserted that no hearing was granted before passing the order confirming the demand.

Application of Law to Facts: The Court examined the record, including the order dated 08.04.2024 and the replies filed by the appellant. It found that the Assessing Authority had duly considered the appellant's reply filed on 08.04.2024 prior to passing the impugned order. The Court held that the appellant's claim of denial of hearing was factually incorrect and unsupported by the record.

Treatment of Competing Arguments: While the appellant stressed the violation of natural justice, the State argued that the appellant was given ample opportunity and that the replies were duly considered. The Court sided with the State's position based on the documentary evidence.

Conclusions: There was no violation of the principles of natural justice or statutory provisions regarding the right to hearing under Section 75(4) of the CGST Act.

2. Validity of SCN-2 Issued Beyond Extended Timeline and Introduction of New Allegations

Relevant Legal Framework and Precedents: Section 73 of the CGST Act prescribes timelines for issuance of show cause notices for tax recovery, which may be extended under Section 168A notifications. The appellant argued that SCN-2 was issued after the expiry of the extended timeline and introduced new allegations not contained in SCN-1 or FORM ASMT-10, thus being invalid.

Court's Interpretation and Reasoning: The appellant contended that the issuance of SCN-2 after the extended timeline and without specifying a date for personal hearing amounted to procedural irregularity and unfairness.

Key Evidence and Findings: The Court reviewed the timeline of notices and replies. It noted that the appellant had sought and obtained extensions and that the Assessing Authority had issued SCN-2 within the permissible period under the law and related notifications.

Application of Law to Facts: The Court found no merit in the contention that SCN-2 was invalid on account of timing or content. It observed that the appellant was given adequate opportunity to respond to all allegations, including those newly introduced in SCN-2.

Treatment of Competing Arguments: The appellant's argument about new allegations was considered but rejected as the appellant had responded in detail and the Assessing Authority had considered the replies. The State's argument that the process was compliant with statutory timelines prevailed.

Conclusions: The issuance of SCN-2 was valid and within the extended statutory timeline. Introduction of new allegations did not vitiate the process as the appellant was afforded an opportunity to reply.

3. Availability of Alternative Statutory Remedies and Maintainability of Writ Petition

Relevant Legal Framework and Precedents: Sections 107 and 109 of the CGST Act provide for appeal mechanisms against orders passed by assessing authorities, including appeals before the Additional Commissioner and the Appellate Tribunal. The principle of exhaustion of alternative remedies is well-established in administrative law and tax jurisprudence.

Court's Interpretation and Reasoning: The State submitted that the appellant had not exhausted the statutory appellate remedies before approaching the High Court by way of writ petition, rendering the petition not maintainable.

Key Evidence and Findings: The Court noted that the appellant had not filed any appeal against the order dated 08.04.2024 before the competent appellate authorities as prescribed under the CGST Act.

Application of Law to Facts: The Court held that the appellant's failure to exhaust the efficacious statutory remedies was a valid ground for dismissal of the writ petition. The learned Single Judge had rightly dismissed the writ petition while granting liberty to file appeal within 30 days and directed the appellate authority to decide the appeal expeditiously without raising limitation objections.

Treatment of Competing Arguments: The appellant's urgency to approach the Court was rejected in light of the availability of alternative remedies. The Court emphasized adherence to statutory appellate processes.

Conclusions: The writ petition was not maintainable as the appellant had alternative efficacious statutory remedies which were not exhausted.

Significant Holdings

"From the perusal of the documents filed with the writ petition and order dated 08.04.2024, it is very much clear that the reply filed by the appellant on 08.04.2024 has been duly considered by the Assessing Authority and prior to the passing of the impugned order the Assessing Authority has provided proper opportunity of hearing to the appellant."

"When the appellant/writ petitioner has an alternative efficacious remedy, as stated above, there was no reason for the appellant to approach this Court in a haste."

"The learned Single Judge has already granted liberty to the appellant to file an appeal before the concerned appellate authority according to the provisions of the Act, within 30 days from the date of receipt of a copy of the order and it has further been directed that the same shall be decided by the appellate authority in accordance with law within a reasonable period of time without raising objection to limitation."

The Court established that compliance with statutory timelines and procedures, including the right to a hearing, is critical in tax demand proceedings under the CGST Act. It reinforced the principle that where efficacious statutory remedies exist, they must be exhausted before invoking writ jurisdiction. The Court dismissed the appeal, affirming the correctness of the Single Judge's order.