11/01/2024
Allahabad High Court quashes tax orders passed without hearing assessee who had cancelled GST registration
The Court emphasised that audi alteram partem (a phrase denoting "hear the other side") is a sine qua non of due process, standing as an unwavering sentinel against the potential tyranny of unchecked power.
Allahabad High Court
Ratna Singh
Published on:
11 Jan 2024, 4:59 pm
4 min read
The Allahabad High Court recently quashed orders passed by the Goods and Services Tax (GST) authorities against an assessee-company which claimed that it had already cancelled its GST registration voluntarily before even a show cause notice was issued in the matter.
The Court quashed the order after noting that the authorities had not heard the assessee properly before issuing adverse orders against it.
Justice Shekhar B Saraf observed that such orders could not have been passed without first presenting the assessee an opportunity to be heard.
Such an opportunity to be heard was hampered in this case as the assessee-company was not aware of a tax evasion notice issued against it on the tax department's website, since it had already cancelled its registration voluntarily and had no occasion to check the website thereafter.
The Court emphasised that audi alteram partem (hear the other side) is an essential component of due process and an unwavering sentinel against the potential tyranny of unchecked power.
"The judicious application of audi alteram partem not only upholds the sanctity of individual freedom but also fortifies the integrity of legal proceedings, fostering a milieu where justice is not merely meted out, but is perceived to be done through a conscientious consideration of diverse and adversarial perspectives," Justice Saraf added.
The Court explained that the audi alteram partem principle ensures that no one is condemned, penalized, or deprived of their rights without a fair and reasonable opportunity of hearing.
"It acts as a safeguard against arbitrary decision-making, upholding the principle of due process while also providing a crucial foundation for just and equitable legal or administrative proceedings," the order stated.
The significance of the principal of audi alteram partem is deeply entrenched in the foundational tenets of natural justice, the Court further noted.
"The phrase, denoting 'hear the other side,' is emblematic of the sacrosanct right vested in individuals to be accorded a fair and impartial hearing before the adjudication of their rights or interests. This cardinal principle operates as a bulwark against arbitrariness and the capricious exercise of authority, mandating that decisions be reached only subsequent to a comprehensive and equitable deliberation of all relevant contentions," it observed.
The Court was dealing with plea by Eastern Machine Bricks and Tiles Industries (petitioner), which had challenged orders issued on September 14, 2021 by the Assistant Commissioner of State Tax and on October 5, 2023 by the Additional Commissioner, Grade-2, (Appeal)-III, State Tax.
These orders related to tax dues under the Central Goods and Services Tax Act (CGST Act) for the 2018-19 period.
The counsel for the petitioner submitted that the petitioner had cancelled its registration voluntarily on September 18, 2019 whereas the notice under Section 74 of the CGST Act was given to it only by way of uploading the same on a web portal on a subsequent date.
He further submitted that the notice was issued in the year 2021 or in late December 2020 and that the date fixed for hearing was January 12, 2021.
Pertinently, the Court was told that the petitioner had already cancelled its registration voluntarily before this and that it was not required to check the web portal.
The counsel argued that after the first order was passed, the same was challenged before the appellate authority.
However, the petitioner claimed that the appellate authority fixed the matter for hearing on a date on which the petitioner could not be present for hearing and did not grant a second opportunity of hearing to the petitioner.
Subsequently, the appellate authority passed an order on October 5, 2023 dismissing the appeal of the petitioner on the ground that none appeared on behalf of the petitioner.
The Court noted that since the petitioner had cancelled its registration in the year 2019, a proper notice was required to be issued to it under Section 74 of the CGST Act at its address.
"However, the authorities simply uploaded the Section 74 show cause notice on the web portal inspite of knowing that the petitioner had already cancelled its registration prior to the date of issuance of the show cause notice. This action clearly prevented the petitioner from appearing in the hearing in the original proceeding under Section 74 of the Act that was accordingly passed ex parte," the Court noted.
The Court also observed that the authorities did not provide the petitioner with copies of a Special Investigation Branch (SIB) report that was relied upon to initiate action against the petitioner.
"It was incumbent upon the authorities to provide the copies of materials being relied upon by them (SIB report, in this case) to the petitioner/assessee so as to enable him to deal with the same," the Court went on to state.
The Court opined that any such action that proceeds without proper intimation and service of the show cause notice to the petitioner is vitiated and bad in law.
Therefore, it quashed the tax orders issued against the assessee and ordered the tax authorities concerned to pass a reasoned order in the matter after giving the petitioner a proper opportunity of hearing on January 30.
Advocate Aloke Kumar appeared for petitioner.
Advocate Arvind Kumar Mishra appeared for the respondent authorities.
