Facts of the Case

The appellants filed an intra-Court appeal challenging the order dated 19.07.2022 passed in WPA 15040 of 2022.

The dispute arose from action initiated by the respondent GST Authority. The appellants primarily contended that a non-speaking order had been uploaded on the website and was purported to be an adjudication order, even though no show cause notice had been issued before such adjudication.

The appellants challenged the validity of the proceedings on the ground that the adjudication action had been taken without following the mandatory requirement of issuing a show cause notice and without providing an effective opportunity to respond.

Upon examining the relevant materials placed before it and after hearing the learned Government Counsel appearing for the respondents, the Division Bench found that no show cause notice had been issued.

The Court held that, in such circumstances, the proceedings suffered from a clear violation of the principles of natural justice as well as the provisions of the statute.

Issues Involved

  1. Whether an adjudication proceeding under the GST law could legally be sustained when no show cause notice had been issued to the affected taxpayer.
  2. Whether uploading a non-speaking order on the website, purportedly as an adjudication order, without prior issuance of a show cause notice violated the principles of natural justice.
  3. Whether the proceeding dated 18.04.2019 was liable to be quashed due to the absence of a show cause notice.
  4. Whether the appellants were entitled to a fresh opportunity to submit their reply or objections together with supporting documents and records before adjudication on merits.
  5. Whether the appropriate respondent could undertake fresh adjudication after issuing a proper show cause notice and following due process of law.

Petitioner’s / Appellants’ Arguments

The appellants challenged the action initiated by the respondent GST Authority primarily on the ground that a non-speaking order had been uploaded on the website and purported to constitute an adjudication order.

The central contention of the appellants was that no show cause notice had been issued before passing or uploading the purported adjudication order.

Accordingly, the appellants questioned the legality and validity of the adjudication proceedings on the basis that the mandatory procedural safeguards had not been followed.

The appellants’ challenge was founded on the absence of prior notice and the consequential denial of a proper opportunity to submit a reply, objections, documents, and records before adjudication.

Respondent’s Arguments

The learned Government Counsel appeared for the respondent State authorities and was heard by the Court.

After considering the relevant materials and hearing the respondents’ counsel, the Court recorded a clear finding that no show cause notice had been issued.

The judgment does not record any detailed independent submission on behalf of the respondents capable of overcoming or disproving the fundamental procedural defect arising from the absence of a show cause notice.

Court Order / Findings

The Calcutta High Court found that no show cause notice had been issued to the appellants.

The Court held that if no show cause notice had been issued, the position constituted a clear violation of the principles of natural justice and the provisions of the statute.

The Court considered this defect sufficient to quash the proceeding dated 18.04.2019.

Accordingly, the appeal was allowed and the order passed in the writ petition was set aside.

The impugned order dated 18 April 2019 was quashed.

The Court directed the appropriate respondent authority to issue a show cause notice to the appellants within 15 days from the date of receipt of the server copy of the High Court’s order.

The appellants were to be granted reasonable time to submit their reply or objections together with relevant documents and records.

Thereafter, the show cause notice was directed to be adjudicated on merits and in accordance with law.

The Court further directed that a reasoned order should be passed after such adjudication.

The connected application was consequently disposed of.

Important Clarification

The High Court did not terminate the matter in a manner preventing lawful fresh adjudication. Instead, it quashed the defective proceeding because no show cause notice had been issued and directed restoration of procedural fairness through a fresh show cause notice and proper adjudication.

The appropriate respondent was required to issue the show cause notice within 15 days from receipt of the server copy of the Court’s order.

The appellants were required to be granted reasonable time to file their reply or objections along with supporting documents and records.

Only thereafter could the matter be adjudicated on merits and in accordance with law, followed by a reasoned order.

The Court also expressly clarified that it would be open to the appropriate respondent to club the adjudication with other adjudication proceedings that were in the pipeline.

Link to download the order –https://mytaxexpert.co.in/uploads/1783502887_3053.pdf

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