Tvl.Shanmugaiahthevar Madasamy vs. State Of Tamil Nadu

Facts

The petitioner, Tvl.Shanmugaiahthevar Madasamy, a Government Contractor, filed a writ petition challenging an order dated 10.08.2023 passed by the 8th respondent (State Tax Officer) for the assessment year 2022-23. The petitioner contended that the impugned order was passed without their participation in the show cause proceedings or providing a reply to various notices, including ASMT 10, DRC 01A, and DRC 01, and also failed to respond to personal hearing notices. The petitioner's work contracts were executed prior to 13.07.2022, with payments received subsequently. A notification dated 13.07.2022 revised the GST rate for the petitioner's services from 12% to 18%. The Commissioner, Rural Development and Panchayat Raj Department, had directed supplementary contracts for work executed on or after 18.07.2022, separating it from work done up to 17.07.2022, while applying the applicable GST rate.

Held

The Court held that the impugned order dated 10.08.2023 passed by the 8th respondent was liable to be quashed. The reasoning was that the order was passed without the petitioner participating in the show cause proceedings and without providing a reply to the notices issued. The Court acknowledged that the dispute pertained to differential tax amounts due to the revision of tax rates by Notification No.03/2022-Central Tax (Rate) dated 13.07.2022. The Court decided to quash the impugned order and remit the case back to the 8th respondent for a fresh order on merits and in accordance with law. The petitioner was directed to file a reply to the show cause notice within six weeks. The Court also permitted the petitioner to enter into a supplementary contract for works executed after 17.07.2022 and directed that all recovery proceedings be kept in abeyance pending further orders. The ratio decidendi is that orders affecting a party's rights must be passed after affording a proper opportunity of being heard, and procedural lapses leading to ex-parte decisions warrant quashing and remand.

Key Issues

1. Whether the impugned order dated 10.08.2023 passed by the 8th respondent is liable to be quashed for non-compliance with principles of natural justice, specifically for passing an order without the petitioner's participation in the proceedings and without considering their reply to show cause notices and personal hearing notices? (Question of law and fact, turning on principles of natural justice and procedural fairness under GST law). Petitioner's arguments: The petitioner argued that the impugned order was passed ex-parte without affording them an opportunity to present their case, violating principles of natural justice. They relied on the communication from the Commissioner, Rural Development and Panchayat Raj Department, dated 05.12.2022, which suggested a procedure for handling GST rate changes for work executed before and after the notification date. Respondents' arguments: The respondents opposed the writ petition, primarily arguing that it was liable to be dismissed on grounds of laches, citing the Supreme Court's decision in Assistant Commissioner (CT) LTU, Kakinada and others vs. Glaxo Smith Kline Consumer Health Care Limited (2020 SCC Online SC 440).