M/S Avinash Transport And Ors vs. The Supdt, Group, 2 Cgsr And Central Excise Circle 1 Asansol Durgapur Audit Commissionerate And Ors

Held

The High Court allowed the appeal and set aside the order of the learned Single Bench. The Court held that the procedure followed by the authorities was not in accordance with the law. Specifically, the Court found that the appellant-assessee was entitled to an opportunity to place their stand before the jurisdictional officer for adjudication. The authorities had not considered or adjudicated the correctness of the stand taken by the appellant regarding their eligibility for Input Service Credit, as recorded in the spot memo. The Court reasoned that the draft audit report, along with the demand notice, should have been treated as a show cause notice, allowing the assessee to respond. The ratio decidendi is that statutory authorities must follow due process and principles of natural justice, affording a proper opportunity for adjudication before raising demands, especially when the assessee claims eligibility for credits. The Court directed the petitioners to treat the allegations in para 2 of the Draft Audit Report as a show cause notice and submit their objections within 30 days. The jurisdictional officer was directed to afford a personal hearing and pass a speaking order on merits. The issue of delay was implicitly set aside by directing the adjudication process to commence.

Facts

The appellants, M/s. Avinash Transport and others, are challenging an order of the learned Single Bench that dismissed their writ petition. The Single Bench had dismissed the petition on the grounds of delay, as the demand being challenged was raised in 2019. The dispute originated from a spot memo dated 04.01.2018 issued by the Superintendent, CGST & Central Excise, Asansol. The memo noted that the appellant had sub-contracted services and paid service tax and cesses, but erroneously reflected input service credit in the receiver portion of their ST-3 return. The appellant claimed eligibility for Input Service Credit amounting to Rs. 32,158,005/-. Subsequently, a recovery notice dated 24.04.2019 was issued, alleging a service tax default of Rs. 4,75,61,318/-, based on a Draft Audit Report. The appellant contended that their eligibility for input service credit was not considered.

Key Issues

1. Whether the learned Single Bench erred in dismissing the writ petition on the ground of delay, considering the procedural irregularities in the demand and adjudication process? (Mixed question of law and fact, concerning principles of natural justice and procedural fairness under GST/Service Tax law). 2. Whether the authorities followed the due process of law in issuing the demand notice and proceeding with recovery without properly adjudicating the appellant's claim for Input Service Credit as recorded in the spot memo? (Question of law, concerning adherence to statutory procedures). Contentions of the Appellants: The appellants argued that the spot memo itself acknowledged their eligibility for Input Service Credit, but this was not considered by the authorities. They contended that the demand notice was issued without proper adjudication and that their reply to the spot memo was not addressed. They relied on Section 72A(4) of the Finance Act, 1994, which mandates an opportunity to be afforded to the assessee. They argued that the procedure followed was not in line with the principles of natural justice, as they were not given a proper opportunity to present their case before a final decision was made. Contentions of the Respondent/CGST Authority: The learned standing counsel for the respondent department submitted that the audit report was not in terms of Section 72A(4) of the Finance Act, 1994, but was based on other factors. The judgment does not record any further specific arguments from the respondent.