M/S Zaheer Electrical Industries vs. The Additional Chief Secretary

Facts

The petitioner, M/s Zaheer Electrical Industries, filed a writ petition challenging an adjudication order dated 26.12.2023, passed by the Deputy Commissioner of Commercial Taxes (Respondent No. 2) under Section 73(9) of the KGST Act, 2017, read with Rule 142(1)(a) and 142(5) of the KGST Rules, 2017. The petitioner asserted that they had voluntarily paid the tax liability on 19.09.2022, via DRC-3, prior to the show-cause notice dated 03.11.2022. A reply to the show-cause notice was submitted on 22.12.2022. The petitioner claimed that the adjudication order did not reference their reply and that the payment of liability was made under protest, not as an unconditional acceptance.

Held

The Court held that the adjudication order passed by the Deputy Commissioner of Commercial Taxes was invalid. It reasoned that the petitioner had filed a reply to the show-cause notice, and according to Section 75(4) of the KGST Act, an opportunity of personal hearing must be afforded if an adverse order is contemplated. The Court found that the adjudication order did not appear to have considered the petitioner's reply and that the payment made by the petitioner was under protest. Therefore, the Court set aside the impugned order and remitted the matter back to the stage of the show-cause notice for fresh consideration. The petitioner was directed to appear before Respondent No. 2 on 10.07.2024. All contentions were kept open for further proceedings.

Key Issues

1. Whether the adjudication order passed under Section 73(9) of the KGST Act, 2017, read with Rule 142(1)(a) and 142(5) of the KGST Rules, 2017, is valid, considering the petitioner had already paid the tax liability under protest prior to the show-cause notice and submitted a reply that was allegedly not considered. (Mixed question of law and fact, turning on Section 73(9), Rule 142(1)(a), Rule 142(5), and Section 75(4) of the KGST Act/Rules). Petitioner's contentions: The petitioner argued that once a reply to the show-cause notice was filed, the matter became a disputed question requiring adjudication. They contended that the adjudication order failed to consider their reply and that the payment made was under protest, not an unconditional acceptance of liability. They also relied on Section 75(4) of the KGST Act, which mandates an opportunity of personal hearing before passing an adverse order. Revenue's contentions: The judgment does not record any specific contentions made by the revenue or state.