2025 (6) TMI 1341 - HC - GST

Violation of principles of natural justice - service of SCN - neither the show cause notices nor the impugned order of assessment has been served by tendering to the petitioner or by registered post instead it was uploaded in the common portal - petitioner is ready and willing to deposit 25% of the disputed tax - HELD THAT - According to the petitioner the petitioner was not aware of the issuance of the show cause notice issued through the GST Portal and the original of the said show cause notice was not furnished to them. In such circumstances this Court is of the view that the impugned assessment order came to be passed without affording any opportunity of personal hearing to the petitioner confirming the proposals contained in the show cause notice. Merely passing an ex parte order by fulfilling the empty formalities will not serve any useful purpose and the same will only pave way for multiplicity of litigations not only wasting the time of the Officer concerned but also the precious time of the Appellate Authority/Tribunal and this Court as well. Thus when there is no response from the tax payer to the notice sent through a particular mode the Officer who is issuing notices should strictly explore the possibilities of sending notices through some other mode as prescribed in Section 169(1) of the Act preferably by way of RPAD which would ultimately achieve the object of the GST Act. This Court finds that there is a lack of opportunities being provided to serve the notices/orders etc. effectively to the petitioner. Hence this Court is inclined to set-aside the impugned order with terms by issuing the directions imposed - petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

- Whether service of the show cause notice and assessment order by uploading on the GST common portal constitutes valid and effective service under the Central Goods and Services Tax Act, 2017 (GST Act).

- Whether the petitioner was afforded adequate opportunity of hearing before passing the impugned assessment order.

- Whether the assessing authority complied with the procedural safeguards prescribed under Section 169 of the GST Act regarding modes of service of notices and orders.

- Whether the impugned order passed without personal hearing and effective service is liable to be set aside.

- The Court also considered the petitioner's willingness to deposit 25% of the disputed tax and the implications thereof on the relief and directions to be granted.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Effectiveness of Service of Show Cause Notice and Assessment Order by Uploading on GST Portal

Relevant Legal Framework and Precedents: Section 169(1) of the Central Goods and Services Tax Act, 2017 prescribes modes of service of notices and orders, including delivery at the place of business, sending by registered post, courier, or electronic means. The GST common portal is recognized as a mode of electronic communication. However, the law mandates effective service to ensure the recipient is made aware of the proceedings.

Court's Interpretation and Reasoning: The Court acknowledged that uploading the show cause notice on the GST portal is a recognized mode of service. However, the Court emphasized that mere uploading without ensuring the recipient's awareness or response is insufficient. The Court observed that repeated reminders were issued through the portal, but no alternative mode of service was explored by the officer despite no response from the petitioner.

Key Evidence and Findings: The petitioner contended that the notices were never physically served or sent by registered post and that they were unaware of the proceedings initiated against them. The petitioner's lack of knowledge was supported by the absence of any reply or appearance before the authority.

Application of Law to Facts: The Court held that service by uploading alone, without any follow-up by other prescribed modes such as Registered Post with Acknowledgment Due (RPAD), does not amount to effective service. The Court stressed that the officer should have applied mind to explore alternative methods to ensure actual receipt of notices.

Treatment of Competing Arguments: While the respondents argued that uploading on the portal sufficed, the Court found this approach inadequate given the petitioner's non-awareness and non-participation. The Court balanced the need for procedural compliance with the objective of effective communication under the GST Act.

Conclusion: The Court concluded that service by uploading alone was not effective service in this case, rendering the subsequent proceedings and order infirm.

Issue 2: Adequacy of Opportunity of Hearing Before Passing the Impugned Assessment Order

Relevant Legal Framework and Precedents: Principles of natural justice and Section 75 of the GST Act require that a taxpayer be given an opportunity of hearing before passing an assessment order. The show cause notice initiates the process, and the taxpayer must be given a chance to respond and be heard.

Court's Interpretation and Reasoning: The Court found that the petitioner was not afforded any personal hearing or opportunity to file a reply, as the petitioner was unaware of the show cause notice due to ineffective service. The impugned order was passed ex parte confirming the proposals without any participation from the petitioner.

Key Evidence and Findings: The petitioner's failure to respond was attributed to lack of notice rather than deliberate non-compliance. The absence of personal hearing violated the principles of natural justice.

Application of Law to Facts: The Court held that passing an ex parte order without affording an effective opportunity to be heard is contrary to the statutory scheme and principles of fairness.

Treatment of Competing Arguments: The respondents did not dispute the absence of hearing but relied on procedural compliance by uploading notices. The Court rejected this as insufficient.

Conclusion: The Court concluded that the impugned order suffered from procedural infirmity due to denial of opportunity of hearing.

Issue 3: Compliance with Section 169 of the GST Act Regarding Modes of Service

Relevant Legal Framework and Precedents: Section 169(1) of the GST Act lists valid modes of service, including delivery at place of business, registered post, courier, and electronic means. The section requires the officer to ensure effective service.

Court's Interpretation and Reasoning: The Court emphasized that the officer must not restrict themselves to a single mode of service when no response is received. Instead, the officer must explore alternate modes to ensure the notice is brought to the taxpayer's attention.

Key Evidence and Findings: The officer issued repeated reminders through the portal but did not send notices by registered post or other modes. This was held to be a failure to apply mind and to comply with the statutory mandate.

Application of Law to Facts: The Court held that mere fulfillment of formalities by uploading notices without ensuring effective communication is not sufficient. The statutory scheme intends to prevent empty formalities that lead to avoidable litigation.

Treatment of Competing Arguments: The respondents' reliance on electronic service alone was found inadequate in light of the petitioner's non-awareness.

Conclusion: The Court held that the assessing officer erred in not exploring alternative modes of service as required under Section 169(1).

Issue 4: Effect of Petitioner's Willingness to Deposit 25% of Disputed Tax

Relevant Legal Framework and Precedents: Voluntary deposit of a portion of disputed tax often weighs in favor of granting relief and directions for fresh adjudication. It reflects bona fide intent to comply and facilitates lifting of provisional attachments.

Court's Interpretation and Reasoning: The Court took note of the petitioner's voluntary offer to deposit 25% of the disputed tax. The respondents also fairly agreed to consider this offer. The Court used this as a basis to grant liberty for deposit and issue directions for lifting bank attachment.

Key Evidence and Findings: The petitioner's offer was unconditional and timely. The petitioner sought directions to lift bank attachment subject to such deposit.

Application of Law to Facts: The Court directed that upon proof of deposit of 25% of disputed tax, the department shall issue directions for de-freezing the petitioner's bank account. This was coupled with remand for fresh adjudication ensuring procedural fairness.

Treatment of Competing Arguments: The respondents did not oppose the petitioner's request and agreed to the deposit condition.

Conclusion: The Court granted liberty to deposit 25% of disputed tax and ordered appropriate directions for lifting bank attachment and fresh consideration of the matter.

3. SIGNIFICANT HOLDINGS

- "No doubt sending notice by uploading in portal is a sufficient service, but, the Officer who is sending the repeated reminders, inspite of the fact that no response from the petitioner to the show cause notices etc., the Officer should have applied his/her mind and explored the possibility of sending notices by way of other modes prescribed in Section 169 of the GST Act, which are also the valid mode of service under the Act, otherwise it will not be an effective service, rather, it would only fulfilling the empty formalities."

- "Merely passing an ex parte order by fulfilling the empty formalities will not serve any useful purpose and the same will only pave way for multiplicity of litigations, not only wasting the time of the Officer concerned, but also the precious time of the Appellate Authority/Tribunal and this Court as well."

- The Court set aside the impugned order dated 28.08.2024 and remanded the matter to the first respondent for fresh consideration with directions to:

• Allow the petitioner to deposit 25% of the disputed tax within two weeks.
• Permit the petitioner to file reply with supporting documents within two weeks thereafter.
• Issue a clear 14-day notice affording personal hearing before passing any fresh order.
• Upon proof of deposit, direct the department to lift any bank attachment immediately.

- The Court established the core principle that effective service and opportunity of hearing are essential to uphold the statutory scheme and principles of natural justice under the GST Act.

- The judgment underscores the duty of tax authorities to ensure notices are not mere formalities but effective communications, failing which orders passed may be set aside.