2025 (6) TMI 1570 - HC - GST

Challenge to order passed u/s 73 of the WBGST/CGST Act 2017 - notice in Form GST DRC 01A served prior to issuance of the show cause - whether proper officer had already made up its mind to pass an adverse order against the petitioner? - HELD THAT - Prima facie it is found that the petitioner had been served with a notice in Form GST DRC 01A dated 19th December 2023 prior to issuance of the show cause. Subsequently a show cause was issued on 25th April 2024 and later an order under Section 73(1) of the said Act has been passed on 2nd December 2024. The petitioner has stated that in the first week of January 2025 upon the change of accountant of the petitioner the petitioner had been able to ascertain and was handed over the aforesaid notices and order of the proceeding and had no notice prior thereto. It is however not the case of the petitioner that since December 2023 the petitioner did not operate the portal or did not file any returns. The order in the instant case was not passed overnight. Admittedly the order was preceded not only by the show cause but also by a pre show cause notice and as such it is very difficult to accept the contention of the petitioner that the petitioner was unaware with regard to the aforesaid proceeding and only became aware thereof upon the new accountant taking charge in the first week of January 2025. In the instant case the proper officer had duly afforded the petitioner with an opportunity to respond to the show cause well before the opportunity of personal hearing was afforded. Simply because the proper officer in the show-cause had notified the petitioner with the date for opportunity of personal hearing prior to receipt of the reply the same does not and cannot render the aforesaid show cause bad nor can it be concluded that the proper officer had made up his mind in the matter. Having regard to the provision of Section 75(4) of the said Act it is apparent that the said provision provides that an opportunity of hearing shall be granted where a request is received from the person chargeable with tax or where any adverse decision is contemplated against such person. The word contemplate has not been defined in the said Act - There is no irregularity on the part of the proper officer in providing the petitioner with an opportunity of hearing by notifying the same to the petitioner while issuing the show cause especially when the opportunity of hearing was afforded subsequent to the date of furnishing of the response to the show cause. Admittedly in this case the petitioner did not avail such opportunity and did not appear before the authority. Having not done so the petitioner is not entitled to question the same. Thus no interference to the order is called for in exercise of extraordinary writ jurisdiction of this Court. However having regard to the fact that the scheme of the said Act provides for multi tiered adjudicating process especially since the Appellate Tribunal is yet to be constituted the petitioner should not be rendered remediless. Conclusion - No violation of natural justice or predetermination was found in affording the opportunity of hearing simultaneously with the show cause notice. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the issuance of a show cause notice simultaneously with the opportunity of personal hearing indicates that the proper officer had a predetermined mind to pass an adverse order against the petitioner, thereby violating principles of natural justice.

- Whether the proper officer was required to await the petitioner's reply to the show cause notice before affording an opportunity of personal hearing under Section 75(4) of the WBGST/CGST Act, 2017.

- Whether the petitioner's claim of non-receipt or lack of knowledge of the notices and order prior to January 2025 is tenable given the procedural history and portal usage.

- Whether the petitioner's failure to avail the opportunity of personal hearing disentitles it from challenging the impugned order.

- The scope and application of Section 75(4) of the WBGST/CGST Act, 2017, particularly the interpretation of the term "contemplate" in the context of granting opportunity of hearing.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Predetermination of Mind by Issuing Show Cause and Hearing Opportunity Simultaneously

Relevant Legal Framework and Precedents: Section 75(4) of the WBGST/CGST Act mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or where any adverse decision is contemplated against such person. The petitioner relied on an unreported judgment of the Hon'ble High Court of Chhattisgarh (Mahindra & Mahindra Limited) which held that personal hearing should not be afforded prior to receipt of reply to the show cause notice, implying predetermination if done otherwise.

Court's Interpretation and Reasoning: The Court examined the timing and sequence of the notices and opportunity of hearing. It found that the petitioner was afforded an opportunity to respond to the show cause notice before the personal hearing date and that the personal hearing was scheduled after the response deadline. The Court emphasized that the word "contemplate" in Section 75(4) does not imply that the proper officer has made up its mind to pass an adverse order but only that an adverse decision is under consideration. Reliance was placed on the dictionary definition from Black's Law Dictionary which defines "contemplate" as "to view or consider with continued attention" and not to mean a concluded decision.

Key Evidence and Findings: The Court noted that the show cause notice was issued on 25th April 2024, preceded by a pre-show cause notice dated 19th December 2023, and the opportunity of hearing was scheduled after the petitioner's reply could be submitted. The petitioner did not dispute the sequence of these notices or the filing of returns during the period.

Application of Law to Facts: The Court held that issuing a notice of personal hearing simultaneously with the show cause notice does not amount to predetermination if the hearing is scheduled after the petitioner's reply. The proper officer's conduct was consistent with statutory requirements and principles of natural justice.

Treatment of Competing Arguments: The petitioner's contention that the opportunity of hearing should only be granted after receipt of the reply was rejected. The Court distinguished the Chhattisgarh High Court case by noting that in that case, the personal hearing was afforded before the reply deadline, whereas here it was after. The petitioner's argument that the simultaneous issuance indicated bias was not accepted.

Conclusion: No violation of natural justice or predetermination was found in affording the opportunity of hearing simultaneously with the show cause notice.

Issue 2: Petitioner's Claim of Non-Receipt or Lack of Knowledge of Notices and Orders

Relevant Legal Framework: The petitioner claimed ignorance of the notices and order until January 2025 due to the notices being uploaded in the "additional notices and orders" section of the portal, allegedly causing the petitioner to miss them.

Court's Interpretation and Reasoning: The Court observed that the petitioner did not deny operating the portal or filing returns since December 2023. Given the procedural timeline and that the order was not passed abruptly but after multiple notices and opportunities to respond, the Court found it difficult to accept the petitioner's claim of ignorance.

Key Evidence and Findings: The petitioner's own admission that the change of accountant in January 2025 led to discovery of the notices and order was noted. However, the petitioner's continued portal activity during the relevant period undermined the claim of non-receipt.

Application of Law to Facts: The Court inferred that the petitioner had constructive knowledge of the proceedings and that mere failure to notice the uploaded documents did not absolve the petitioner of responsibility.

Treatment of Competing Arguments: The petitioner's argument was considered but found insufficient to warrant interference with the order.

Conclusion: The petitioner's claim of lack of notice was rejected as untenable.

Issue 3: Petitioner's Failure to Avail Opportunity of Personal Hearing

Relevant Legal Framework: The statutory scheme envisages that an opportunity of personal hearing is a procedural safeguard. However, failure to avail this opportunity may limit the petitioner's rights to challenge the order.

Court's Interpretation and Reasoning: The Court noted that the petitioner did not appear for the hearing despite being notified and having the opportunity. It held that non-availment of this opportunity disentitles the petitioner from questioning the procedural propriety of the hearing.

Key Evidence and Findings: The record showed that the hearing date was communicated and that the petitioner failed to appear.

Application of Law to Facts: The Court applied the principle that procedural safeguards must be utilized by the aggrieved party to claim protection.

Treatment of Competing Arguments: The petitioner's failure to appear was not excused or justified.

Conclusion: The petitioner cannot challenge the order on grounds relating to the hearing opportunity having not availed it.

Issue 4: Interpretation of Section 75(4) and Meaning of "Contemplate"

Relevant Legal Framework: Section 75(4) requires granting an opportunity of hearing where an adverse decision is contemplated or upon written request by the person chargeable.

Court's Interpretation and Reasoning: The Court undertook a linguistic and purposive interpretation of "contemplate," relying on Black's Law Dictionary to clarify that "contemplate" means to consider or have in view, not to have concluded or decided. The Court thus rejected the petitioner's submission that the provision implies a fixed adverse decision at the time of hearing notification.

Key Evidence and Findings: The statutory text and dictionary meaning were the primary sources.

Application of Law to Facts: The Court applied this interpretation to hold that the proper officer's scheduling of a hearing does not indicate a predetermined adverse order.

Treatment of Competing Arguments: The petitioner's argument that "contemplate" means a decided adverse order was rejected as unsupported.

Conclusion: The Court clarified the scope of Section 75(4) and the meaning of "contemplate" in the context of procedural fairness.

3. SIGNIFICANT HOLDINGS

"The word 'contemplate' as used in Section 75(4) of the WBGST/CGST Act does not mean or include that the proper officer had made up its mind to pass an adverse order against the petitioner. It means to view or consider with continued attention; to regard thoughtfully; to have in view as contingent or probable as an end or intention."

"Issuing a notice of personal hearing simultaneously with the show cause notice, when the hearing is scheduled after the date for furnishing the response, does not render the show cause notice bad nor indicate predetermination by the proper officer."

"The petitioner's failure to avail the opportunity of personal hearing disentitles it from challenging the procedural propriety of the hearing or the impugned order on that ground."

"The petitioner's claim of ignorance of the notices and order, despite operating the portal and filing returns during the relevant period, is untenable and does not justify interference with the order."

"The multi-tiered adjudicating process under the Act provides a remedy by way of appeal. The petitioner is directed to prefer an appeal within four weeks, which shall be heard by the appellate authority in accordance with statutory formalities."