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Natural Justice and Procedural Compliance in GST Adjudication: A Judicial Interpretation by Allahabad HC

Introduction

The case of Savitri Tech and Infra Works (P.) Ltd. v. State of U.P.[i] scrutinizes the application of procedural norms and the principles of natural justice while adjudicating issues arising under the Central Goods and Service Tax Act, 2017 (‘CGST Act’). This decision of the Hon’ble Allahabad High Court highlights the procedural obligations of taxpayers while discussing the limits of judicial intervention in cases wherein the Assessee fails to adhere to the established statutory processes.

Brief Facts

  • Savitri Tech and Infra Works (P.) Ltd. (‘Petitioner’), a private limited company, filed returns for the financial year 2018-2019, claiming input tax credit (‘ITC’) based on certain purchases supported by invoices.

  • On 02.11.2023, a show cause notice (‘SCN’) under s. 61 of the CGST Act was issued against the Petitioner on the grounds of a mismatch in the GST returns filed by the Petitioner. The Petitioner failed to submit its reply to the SCN as the notice did not specify a date and time for a personal hearing, with the columns indicating ‘NA’.

  • The Respondent-department issued a subsequent notice under s. 73(1) of the CGST Act on 23.01.2024, giving the Petitioner a shorter timeline than envisaged under s. 73(2) of the CGST Act for replying to the SCN by 23.01.2024.

  • On 23.01.2024, the Petitioner sought an adjournment from the Respondent-department, citing the unavailability of its advocate and the absence of a date and time for a personal hearing. The Petitioner sought a further adjournment on 15.04.2024, citing family engagements. However, the Respondent-department did not entertain both adjournment requests.

  • The deadline for replying to the SCN was 23.01.2024, and the Petitioner failed to file a reply until 15.04.2024, so the Respondent-department passed the demand order on 19.04.2024.

  • Aggrieved by the passing of the demand order, the Petitioner filed the present writ petition, challenging the SCN and the demand order for violating the principles of natural justice, as envisaged under s. 75 of the CGST Act.

Held

The Court, while dismissing the writ petition filed by the Petitioner,  observed  as follows:

  • The Petitioner had ample opportunity to respond to the notices issued by the Respondent-department, and an opportunity for a personal hearing would have been granted had the Petitioner replied to the notices and requested such a hearing.

  • It was further observed that the Respondent-department did not receive either of the adjournment applications filed by the Petitioner. Moreover, the Petitioner failed to annex a copy of the first adjournment application, dated 21.01.2024, to the writ petition.

  • The writ petition was dismissed because the Petitioner failed to establish bona fides and comply with procedural requirements. If they wished to contest the demand further, the petitioner was directed to file an appeal under section 107 of the CGST Act.

Our Analysis

One of the key takeaways from this case is the clarification that personal hearings are not mandatory in every instance under s. 61 of the CGST Act. The Court confirmed that the tax authority’s omission of a hearing date in the initial notice was not a violation of the law, as only a written reply is required at this stage. This interpretation is crucial for both taxpayers and legal practitioners, as it underscores that compliance with procedural timelines and requirements is fundamental to securing rights like adjournments or personal hearings.

Additionally, the Court’s dismissal of the adjournment applications highlights the importance of providing adequate documentation when seeking relief. In this case, the petitioner’s failure to provide formal evidence of their requests contributed to the Court’s decision to reject their claims. This serves as a reminder to practitioners that procedural diligence is essential in tax disputes.









End Note

[i] [2024] 165 taxmann.com 800 (Allahabad).








Authored by Pranav Dabas, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.

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