Facts of the Case

The petitioner, Ramki Cements Private Limited, had recently established a branch office at No. 257, PathinParai, Thottakudi, Tirunelveli, Tamil Nadu – 627151. A GST certificate had thereafter been obtained for the said unit.

According to the petitioner, a mistake occurred in the consignment documentation, whereby the destination was mentioned as Chennai. The consignment was subsequently intercepted by the respondent authority.

Following interception, the respondent issued proceedings resulting in an order of demand of tax and penalty in Form GST MOV-09 dated 21 October 2022.

The petitioner challenged the said order before the Madras High Court and sought quashing of the GST MOV-09 order along with a consequential direction for release of the goods.

The petitioner’s principal grievance was that the notice had been issued to the driver of the consignment and had not been received by the petitioner. Consequently, the petitioner contended that no adequate opportunity had been granted before passing the adverse order.

Issues Involved

The principal issues before the Court were:

  1. Whether issuance of the show cause notice only to the driver of the consignment constituted adequate notice to the petitioner.
  2. Whether the petitioner had been granted a sufficient and meaningful opportunity to respond before passing the order demanding tax and penalty in Form GST MOV-09.
  3. Whether the impugned GST MOV-09 order dated 21 October 2022 was sustainable when the petitioner had not received the show cause notice.
  4. Whether the principles of natural justice had been complied with before passing the adverse tax and penalty order.

Petitioner’s Arguments

The petitioner contended that the destination in the consignment had mistakenly been mentioned as Chennai.

It was submitted that, after interception of the consignment, the respondent issued the impugned notice to the driver. However, the petitioner itself did not receive the notice.

On this basis, the petitioner argued that adequate opportunity had not been granted to respond to the proposed action before the demand of tax and penalty was confirmed.

The petitioner further disputed the respondent’s reliance on an email notice allegedly issued on 21 October 2022. It was specifically pointed out that the impugned order itself was passed on the very same date, namely 21 October 2022.

Accordingly, the petitioner contended that the respondent’s plea regarding adequate notice and opportunity could not be accepted.

Respondent’s Arguments

The learned Additional Government Pleader appearing for the respondent submitted that notice had been given to the driver of the consignment.

The respondent argued that service of notice upon the driver was sufficient under the GST law.

It was further submitted that an email notice had also been issued on 21 October 2022.

On these grounds, the respondent sought to justify the proceedings leading to the impugned demand of tax and penalty.

Court Order / Findings

After hearing the rival submissions and examining the material available on record, the Madras High Court formed the considered opinion that the petitioner had not been granted adequate opportunity.

The Court specifically found that:

  • The petitioner had not received the show cause notice.
  • The show cause notice had been issued to the driver.
  • Issuance of the show cause notice to the driver was not adequate.
  • Consequently, the impugned order was liable to be set aside.

Accordingly, the Court allowed the writ petition and quashed the order of demand of tax and penalty in Form GST MOV-09 dated 21 October 2022.

The respondent was directed to issue a fresh notice to the petitioner.

Upon receipt of the fresh notice, the petitioner was permitted to submit its objections.

The respondent was directed to consider such objections and thereafter pass a speaking order within eight weeks from the date of receipt of a copy of the High Court’s order.

No order as to costs was made, and the connected miscellaneous petitions were closed.

Important Clarification

The significant clarification emerging from the decision is that, in the facts of the case, issuance of a show cause notice merely to the driver of the intercepted consignment was held to be inadequate where the petitioner had not received the notice.

The Court’s decision also highlights that an adverse demand of tax and penalty cannot be sustained where adequate opportunity has not been afforded to the affected person.

Further, the respondent’s submission regarding an email notice dated 21 October 2022 was disputed by the petitioner on the ground that the impugned order itself had been passed on the same date. The Court ultimately concluded that adequate opportunity had not been granted.

The judgment does not grant unconditional final relief against all possible proceedings. Instead, while quashing the impugned GST MOV-09 order, the Court permitted the respondent to recommence the process by issuing a fresh notice, receiving the petitioner’s objections, considering them, and passing a reasoned speaking order within the stipulated period.

Key Legal Takeaway

The decision in Ramki Cements Private Limited vs State Tax Officer reinforces the requirement of adequate opportunity before an adverse GST demand and penalty order is passed. Where the taxpayer has not received the show cause notice and notice has merely been issued to the driver of the consignment, such service was held inadequate in the circumstances of this case. The proper course is to issue fresh notice, allow objections, consider the taxpayer’s response, and pass a speaking order in accordance with law

Link to Download the Order – https://mytaxexpert.co.in/uploads/1783402520_1249compressed.pdf

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