Swadhin Bose vs. The Joint Commissioner Of CGST,Ballygunge Divn. And Ors
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The appellant, Swadhin Bose, filed an intra-court appeal challenging an order dated May 15, 2024, which dismissed his writ petition. The original writ petition challenged an order in original dated February 23, 2023, passed by the adjudicating authority. This order held the appellant liable to pay service tax and cess amounting to Rs. 1,60,03,167/- and imposed a penalty of Rs. 10,000/-. The appellant contended that the adjudicating authority erred in fact by stating the appellant was registered for interior decoration/designing and works contract service, whereas the show cause notice admitted registration as an advertising agency. Furthermore, the appellant argued that the order in original failed to consider his reply dated February 12, 2021, to the show cause notice dated December 31, 2020, wrongly recording that no reply was filed. The appellant also cited his proprietor's ill-health and hospitalization as reasons for not attending the personal hearing.
Held
The Court held that the adjudicating authority's recording of a wrong finding of fact, stating that the appellant had not filed a reply to the show cause notice when a reply dated February 12, 2021, was indeed submitted, amounted to a violation of the principles of natural justice. The Court also found that the appellant's proprietor's ill-health and hospitalization, supported by medical records, provided a valid reason for not attending the personal hearing. The Court noted that the case was taken up for adjudication after two years, and the adjudicating authority could have granted another opportunity for a personal hearing. The Court concluded that these factors constituted violations of natural justice. Therefore, the Court decided to interfere with the order in original and set aside the order of the writ petition. The matter was remanded to the adjudicating authority for fresh consideration, with an opportunity for a personal hearing to the appellant's authorized representative. The adjudicating authority was directed to pass fresh orders on merits after considering the oral submissions, documents, notifications, and the appellant's reply.
Key Issues
1. Whether the adjudicating authority's finding of fact regarding the appellant's registered business activity was perverse and unreasonable, violating Article 226 of the Constitution of India? 2. Whether the adjudicating authority's failure to consider the appellant's reply dated February 12, 2021, and its recording that no reply was filed, constituted a violation of the principles of natural justice, thereby warranting interference under Article 226 of the Constitution of India? Petitioner's Arguments: The appellant argued that the adjudicating authority's finding of fact was incorrect and perverse, as the show cause notice itself admitted the appellant's registration as an advertising agency, not for interior decoration. The appellant further contended that the order in original was passed in violation of natural justice because his reply to the show cause notice was not considered, and it was wrongly stated that no reply was filed. The appellant also pointed to his proprietor's ill-health and hospitalization, which prevented proper instructions to the representative and attendance at the personal hearing, arguing for an opportunity to present his case, relying on Mahindra & Mahindra Ltd. v. Joint Commissioner (CT) Appeals, Chennai. Respondents' Arguments: The respondents argued that the appellant should have filed a statutory appeal under Section 85 of the Finance Act, 1994, and having failed to exhaust this alternative remedy, the writ petition was rightly dismissed. They also noted that the writ petition was filed beyond the limitation period for a statutory appeal.
Sections Cited
Section 85, Article 226, Article 32, Section 11B
AI-generated summary — verify with the full judgment below
2024 Item No.5 gd/s FMA/896/2024 IA NO: CAN/1/2024 Mr. Abhratosh Majumdar, Mr. Avra Majumdar, Ms. Alisha Das, Mr. Suman Bhowmik, Mr. Samrat Das, Ms. Elina Dey, Mr. K. Roy ..for the Appellant. Mr. Bhaskar Prosad Banerjee, Mr. Abhradip Maity ..for the Respondents.
This intra court appeal by the writ petitioner is directed against the order dated 15th May, 2024 in WPA 11595 of 2024. 2. The appellant filed the writ petition challenging the order in original dated 23.02.2023 in and by which the adjudicating authority held that the appellant is liable to pay service tax and cess amounting to Rs.1,60,03,167/- apart from imposing penalty of Rs.10,000/-.
The appellant’s case is that the adjudicating authority recorded a wrong finding of fact with regard to the nature of business activity carried on by the appellant for which registration has been obtained by the appellant inasmuch as in the order in original in paragraph 5.3.2 the adjudicating authority states that the appellant is registered with the service tax
department
for providing
interior decoration/designing and works contract service.
It is pointed out by the learned senior advocate appearing for the appellant that in the show cause notice dated 31st December, 2020 the department admits the fact that the appellant has registered himself as advertising agency service.
Therefore, it is submitted that the adjudication order suffers from perversity and is unreasonable.
The second ground of challenge to the adjudication order is by contending that it has been passed in violation of the principles of natural justice inasmuch as the reply dated 12th February, 2021 submitted by the appellant to the show cause notice dated 31st December, 2020 has not been referred to in the order in original. On the contrary, the adjudication officer records as if no reply was submitted by the appellant/assessee.
It is not in dispute that the adjudicating authority afforded an opportunity of personal hearing to the appellant and it is a case of the appellant that due to ill-health and the proprietor having been hospitalized could not give proper instructions to the 2
authorized representative who also did not appear on the date fixed for hearing.
Therefore, it is submitted that an opportunity may be granted to the appellant to go before the adjudicating authority to place the entire facts more particularly when notifications which were relied on by the appellant in his reply dated 12th February, 2021 has not been adverted to by the adjudicating authority in the order in original dated 23rd February, 2023. 9. In support of his contention the learned senior advocate for the appellant placed reliance on the decision in the case of Mahindra & Mahindra Ltd. v. Joint Commissioner (CT) Appeals, Chennai and Another in (2021) 89 GSTR 269 (Madras).
Mr. Bhaskar Prosad Banerjee, learned senior standing counsel appearing for the respondents submitted that the appellant ought to have filed a statutory appeal before the appellate authority in terms of Section 85 of the Finance Act, 1994 as amended and having exhausted the appellate remedy the learned Single Bench was right in refusing to entertain the writ petition. Furthermore, it is pointed out that the writ petition was filed much after the expiry of the period of limitation to file the statutory appeal.
After we have elaborately heard the learned advocates for the parties and carefully 3
considered the materials placed on record, we need to point out that there are certain broad parameters within which the court has to exercise its juri iction under Article 226 of the Constitution of India. This aspect was taken note of in Mahindra & Mahindra Ltd. and the following parameters were indicated: “(i) if there is unfairness in the action of the statutory authority ; (ii) if there is unreasonableness in the action of the statutory authority ; (iii) if perversity writs large in the action taken by the authority ; (iv) if the authority lacks juri iction to decide the issue ; and. (v) if there has been violation of the principles of natural justi9ce, the court will step in and exercise its juri iction under Article 226 of the Constitution of India.”
The Hon’ble Supreme Court in Mafatlal Industries Ltd. v. Union of India in (1998) 111 STC 467 (SC) equal (1997) 5 SCC 536 held that the juri iction of the High Courts under article 226 and that of the honourable Supreme Court under article 32 of the Constitution of India could not be circumscribed by the provisions of the Enactment (Central Excise Act) and they would certainly have due regard to the legislative intent evidenced by the provisions of the Act and would further exercise their juri iction consistent with the provisions of the Act. Further, the court directed that the writ petition would be considered and disposed of in 4
the light of and in accordance with the provisions of section 11B of the Central Excise Act and for such a reason, the power under Article 226 of the Constitution of India has to be exercised to effectuate rule of law and not for abrogating it.
In the said decision the court had also referred to the decision of the Hon’ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada v. Glaxo Smith Kline Consumer Health Care Limited in (2020) 77 GSTR 342 (SC) wherein the Hon’ble Supreme Court held that although the power of the High Court under Article 226 of the Constitution is very wide, the court must exercise self imposed restraint and not entertain the writ petition. In paragraph 15 of the said judgment the Hon’ble Supreme Court observed that the High Court may accede to such a challenge and can also non-suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. Further, it was held that when the High Court refuses to exercise the juri iction under Article 226 of the Constitution, it would be necessary for the court to record that there was no case of violation of the principles of natural justice or non-compliance of statutory requirements in any manner.
In the preceding paragraph we have indicated the broad parameters within which the court can exercise juri iction under Article 226 of the 5
Constitution of India despite existence of an alternate remedy under the relevant statute.
In the instant case, we find that though the department had received the reply dated 12.02.2021 to the show cause notice dated 31st December, 2020, the adjudicating authority has recorded a wrong finding of fact stating that the appellant/assessee has not filed its reply.
This factual mistake would definitely tantamount to violation of the principles of natural justice as the reply given by the appellant had not been taken note of.
The next aspect of the matter is whether the appellant can be faulted for not availing the opportunity of personal hearing afforded to them by the adjudicating authority.
Admittedly, the appellant is a proprietorship concern and records having produced to show that the proprietor suffered serious health issues and was hospitalized. The necessary medical records also form part of the stay application. Further, it is not clear as to whether the date of personal hearing was postponed in order to afford an effective opportunity more particularly when the case was transferred to the concerned adjudicating authority pursuant to the orders passed by the Chief Commissioner of Central Tax and Central Excise (Kolkata Zone) to be noted that 6
the show cause notice was issued on 31st December, 2020, reply was submitted within the time permitted on 12.02.2021 but the case was taken up for adjudication after two years i.e. during February, 2023. 19. Therefore, the adjudicating authority could have granted one more opportunity to the appellant to appear for a personal hearing. This having not been done, would also amount to the violation of the principles of natural justice.
For the above reasons, we are inclined to interfere with the order in original dated 23rd February, 2023 and remand the matter to the adjudicating authority for fresh consideration after affording an opportunity of personal hearing to the authorized representative of the appellant.
Accordingly, the appeal is allowed. The order passed in the writ petition is set aside. Consequently, the writ petition is allowed and the order in original dated 23rd February, 2023 is set aside and the matter is remanded to the adjudicating authority for fresh consideration. The adjudicating authority shall fix a date for personal hearing on which date the authorized representative of the appellant shall appear without seeking for any adjournment and after considering the oral submissions that may be made including the documents and notifications that may be relied on by the appellant as also the reply submitted 7
by the appellant, fresh orders be passed by the adjudicating authority on merits and in accordance with law.
(T. S. SIVAGNANAM) CHIEF JUSTICE
(BIVAS PATTANAYAK, J.) 8
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.