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2025 (5) TMI 461 - HC - GSTInvalid service of order - detailed order along with Form GST DRC 07 has not been served - petitioner is ready and willing to pay 25% of the disputed tax and that they may be granted one final opportunity before the adjudicating authority to put forth their objections to the proposal - HELD THAT - The petitioner shall deposit 25% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent within a period of four weeks from the date of receipt of a copy of this order. The impugned order dated 13.03.2020 is set aside - Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of the impugned order in the absence of service of detailed order along with Form GST DRC 07 The legal framework governing GST assessments and recovery proceedings under the Goods and Services Tax Act, 2017 requires that the taxpayer be furnished with a detailed order and relevant forms, such as Form GST DRC 07, which acts as a notice for recovery of tax dues. The principle of natural justice mandates that a party must be given adequate notice and opportunity to be heard before adverse orders are passed. The Court noted that the petitioner was not served with the detailed order and Form GST DRC 07, which was a procedural lapse. This omission deprived the petitioner of the opportunity to fully understand the basis of the demand and to effectively contest it. The Court emphasized that such procedural safeguards are essential to ensure fairness and transparency in tax proceedings. In light of these considerations, the Court found the impugned order to be unsustainable on procedural grounds and set it aside. Issue 2: Opportunity to explain the alleged excess claim of Input Tax Credit The petitioner contended that it had filed returns and paid taxes correctly during 2017-18, but a scrutiny revealed an excess claim of ITC. Notices dated 15.03.2019 and 15.04.2019 were issued, to which the petitioner responded with a detailed reply dated 25.04.2019. However, this reply was not considered before passing the impugned order. The Court underscored the importance of considering the taxpayer's objections and replies before confirming any tax demand. It held that ignoring the petitioner's detailed response violated principles of natural justice and statutory mandates. The Court's reasoning aligns with established precedents that require adjudicating authorities to consider all relevant submissions before passing orders affecting tax liabilities. Therefore, the Court directed that the petitioner be granted a final opportunity to submit objections and supporting evidence before the adjudicating authority. Issue 3: Acceptance of 25% payment of disputed tax as condition for remand The petitioner offered to pay 25% of the disputed tax amount and submitted that it had already remitted this amount. The respondent did not raise serious objection to this proposal. The Court relied upon its recent precedent wherein similar matters were remanded subject to the condition of payment of 25% of disputed tax. The Court reasoned that such a condition balances the interests of revenue protection and the taxpayer's right to be heard. It acts as a security to ensure compliance and discourages frivolous litigation while allowing genuine disputes to be adjudicated on merits. Accordingly, the Court ordered the petitioner to deposit 25% of the disputed tax within a stipulated timeframe, adjusting any amount already paid towards this sum, failing which the impugned order would be restored. Issue 4: Legality and procedural aspects of recovery proceedings The impugned order was followed by recovery proceedings, including possible attachment of bank accounts or garnishee actions. The petitioner sought lifting of such attachments on condition of compliance with the 25% payment directive. The Court held that recovery actions should not proceed without adherence to procedural safeguards and the opportunity for the taxpayer to contest the demand. It directed that any recovery by attachment or garnishee be stayed and lifted upon compliance with the payment condition. This approach ensures that recovery measures do not become oppressive or premature and that the taxpayer's rights are protected pending adjudication. 3. SIGNIFICANT HOLDINGS The Court's crucial legal reasoning and principles established include the following:
The Court thus established the core principle that procedural fairness, including service of detailed orders and opportunity to be heard, is indispensable in GST adjudications. It also affirmed the practice of conditional remand subject to partial payment of disputed tax as a balanced mechanism to protect revenue interests while ensuring justice to taxpayers. Final determinations on each issue were:
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