Allahabad High Court Quashes Tax Orders Passed Without Hearing Assessee Who Canceled GST Registration

Allahabad High Court Quashes Tax Orders Passed Without Hearing Assessee Who Canceled GST Registration

The notice under Section 74 of the CGST Act was uploaded on the web portal after the company abandoned its listing

The Allahabad High Court has quashed the orders passed by the Goods and Services Tax (GST) authorities against an assessee-company, which claimed that it had cancelled its GST registration voluntarily before a show-cause notice was issued to it.

The bench comprising Justice Shekhar B Saraf noted that the authorities had not heard the assessee properly before issuing the adverse orders. The opportunity to be heard was hampered, as the assessee was not aware of a tax evasion notice issued against it on the tax department's website. Since it had already canceled the registration, there was no reason for it to check the website.

The Court emphasized, "The judicious application of audi alteram partem (hearing the other side) not only upholds the sanctity of individual freedom but also fortifies the integrity of legal proceedings. It fosters a milieu where justice is not merely meted out but is perceived to be done through a conscientious consideration of diverse and adversarial perspectives.”

The principle ensured that no one was condemned, penalized, or deprived of their rights without a fair and reasonable opportunity of hearing.

The order stated, "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 Court explained that the principle of audi alteram partem was deeply entrenched in the foundational tenets of natural justice.

"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 stressed.

The Court was dealing with the plea of Eastern Machine Bricks and Tiles Industries (petitioner), which had challenged the 14 September 2021 orders of the Assistant Commissioner of State Tax and the subsequent 05 October 2023 order of the Additional Commissioner, Grade-2, (Appeal)-III, State Tax.

The orders related to tax dues under the Central Goods and Services Tax (CGST) Act for the Financial Year 2018-2019.

The petitioner’s counsel submitted that the petitioner had canceled its registration voluntarily on 18 September 2019, whereas the notice under Section 74 of the CGST Act was uploaded on the web portal later.

He submitted that the notice was either issued in December 2020 or early 2021 and that the date of the hearing was fixed for January 2021. Meanwhile, before this, the petitioner had canceled its registration and was not required to check the website.

The counsel argued that after the first order was passed, it was challenged before the appellate authority. However, the appellate authority fixed the matter for the hearing on a date on which the petitioner could not be present. The petitioner was not granted a second opportunity of hearing.

Thereafter, the appellate authority passed an order on 5 October 2023, dismissing the petitioner’s appeal on the ground that none appeared on its behalf.

The Judge noted that since the petitioner had canceled its registration in 2019, proper notice should have been issued to it under Section 74 of the CGST Act at its address.

He stated, "However, the authorities simply uploaded the show-cause notice on the web portal despite knowing that the petitioner had already canceled its registration prior to the date of issuance of the show-cause notice. The action clearly prevented the petitioner from appearing for the hearing in the original proceeding under Section 74 that was passed ex parte.”

The bench 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 it.

The Court held that any such action that proceeded without proper intimation and service of the show-cause notice to the petitioner was vitiated and unlawful.

Thus, while quashing the orders issued against the assessee, it ordered the tax authorities to pass a reasoned order after providing the petitioner a proper opportunity to be heard on January 30.

Advocate Aloke Kumar appeared for the petitioner.

The respondent authorities were represented by advocate Arvind Kumar Mishra.