Bharat Mint And Allied Chemicals vs. Commissioner Commercial Tax And 2 Others

WTAX/1029/2021HC AllahabadGSTCNR UPHC01191324202103 March 20228 pages

For Petitioner: Abhinav Mehrotra, Satya Vrata Mehrotra

AI SummaryAllowed

Facts

The petitioner, Bharat Mint and Allied Chemicals, filed a writ petition challenging an order of adjudication dated November 9, 2021, which imposed a demand of tax, interest, and penalty. The petitioner contended that the order was passed in gross violation of the principles of natural justice, as no oral hearing was afforded, and adverse material was not confronted. The revenue argued that the petitioner had an alternative remedy of appeal under Section 107 of the GST Act, making the writ petition not maintainable. The impugned order was passed under Section 74 of the GST Act for the tax period April 2019-20.

Held

The Court held that an opportunity of personal hearing is mandatory under Section 75(4) of the CGST/UPGST Act, 2017, where an adverse decision is contemplated against a person, even if no specific request for hearing is made. The Court found that the show cause notice mentioned an opportunity for personal hearing but failed to provide the date, time, and venue. It was admitted by the respondents that no personal hearing was afforded. The Court distinguished the Supreme Court judgment in Union of India Vs. M/s.Jesus Sales Corporation, stating it was based on different statutory provisions. The Court concluded that the impugned order was passed in gross violation of the principles of natural justice and therefore, the writ petition was maintainable despite the availability of an alternative remedy. The impugned order dated November 9, 2021, was quashed, and the respondents were granted liberty to pass a fresh order after affording an opportunity of personal hearing. The Court also imposed costs of Rs. 10,000/- on the petitioner and directed the Commissioner, Commercial Tax, U.P. to ensure compliance with Section 75(4) by proper officers.

Key Issues

1. Whether an opportunity of personal hearing is mandatory under Section 75(4) of the Central Goods and Services Tax (CGST)/Uttar Pradesh Goods and Services Tax (UPGST) Act, 2017, when an adverse decision is contemplated against a person chargeable with tax or penalty? 2. Whether, in the facts and circumstances of the case, the impugned adjudication order was passed in breach of the principles of natural justice, and consequently, whether it deserves to be quashed under Article 226 of the Constitution of India? Petitioner's arguments: The impugned assessment order was passed without affording the opportunity of hearing contemplated in Section 75(4) of the Act, thus violating principles of natural justice and rendering the order unsustainable. The petitioner also argued that the existence of an alternative remedy does not bar a writ petition when there is a gross violation of natural justice. Revenue's arguments: The petitioner has an alternative remedy of appeal under Section 107 of the Act, and therefore, the writ petition is not maintainable.

Sections Cited

Section 75(4), Section 74, Section 107

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

A.F.R. Court No. - 3 Case :- WRIT TAX No. - 1029 of 2021 Petitioner :- Bharat Mint And Allied Chemicals Respondent :- Commissioner Commercial Tax And 2 Others Counsel for Petitioner :- Abhinav Mehrotra,Satya Vrata Mehrotra Counsel for Respondent :- C.S.C.,A.S.G.I. Hon'ble Surya Prakash Kesarwani,J. Hon'ble Jayant Banerji,J. 1. Heard Sri Abhinav Mehrotra, learned counsel for the petitioner and learned standing counsel for the State – respondents. 2. This writ petition has been filed praying for the following relief: "1. The Hon'ble Court may be pleased to issue a writ, order or direction in the nature of CERTIORARI, calling for the Record of proceedings from Revenue and to thereafter be further pleased to set- aside and quash the IMPUGNED Order of Adjudication Dt. 09.11.2021 [ANNEXURE NO.7] and connected demand of tax which is made is gross violation of the principles of natural Justice; NO oral hearing in the matter was afforded to Petitioner, adverse material has not been confronted to Petitioner resulting in a most UNFAIR TRIAL. 2. The Hon'ble Court may be pleased to issue a writ, order or direction in the nature of CERTIORARI to set aside and quash the IMPUGNED Order of Adjudication Dt. 09.11.2021 which is made is gross disregard to Judicial Discipline and without meeting the mandate of Law as contained under Section 74(2) of the GST Act. 3. The Hon'ble Court may be pleased to issue a writ, order or direction in the nature of MANDAMUS commanding Revenue authorities to reconsider the case of the Petitioner, lawfully and in good-faith, in the light of submissions filed by Petitioner, and with supplying of relief upon documents and after affording due and proper opportunity of hearing." Submissions 3. Learned counsel for the petitioner submits that the impugned assessment order creating demand of tax, interest and penalty, has been passed without affording opportunity of hearing contemplated in Section 75(4) of the Central Goods and Services Tax, 2017/ U.P. Goods and Services Tax, 2017 (hereinafter referred to as “the Act 2017”) and thus, the impugned order being patently in breach of principles of natural justice, is unsustainable and deserves to be quashed. 4. Learned standing counsel submits that the petitioner has an alternative remedy of appeal under Section 107 of the Act, 2017. Therefore, the writ petition is not maintainable. Discussion & Findings 5. We have carefully considered the submissions of learned counsel for the parties. Question The two question involved in this writ petition are as under :- (i) Whether opportunity of personal hearing is mandatory under Section 75(4) of the CGST/UPGST Act 2017 ? (ii) Whether under the facts and circumstances of the case the impugned adjudication order has been passed in breach of principle of natural justice and consequently it deserves to be quashed in exercise of powers conferred under Article 226 of the Constitution of India ? 6. We have perused the show cause notice dated 09.09.2021 in which it has been mentioned as under: "You may appear before the undersigned for personal hearing either in person or through representative for representing your case on the date, time and venue, if mentioned in the table below." 7. In the table below the aforementioned lines, date, time and venue of personal hearing has not been mentioned. Section 75(4) of the Act, 2017 2 provides that opportunity of personal hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person. 8. Section 75(4) of the Act, 2017 reads as under: “An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.” 9. From perusal of Section 75(4) of the Act, 2017 it is evident that opportunity of hearing has to be granted by authorities under the Act, 2017 where either a request is received from the person chargeable with tax or penalty for opportunity of hearing or where any adverse decision is contemplated against such person. Thus, where an adverse decision is contemplated against the person, such a person even need not to request for opportunity of personal hearing and it is mandatory for the authority concerned to afford opportunity of personal hearing before passing an order adverse to such person. 10. In the counter affidavit the respondents have taken the stand that no opportunity of hearing is required before passing the assessment order. In support of their contention the respondents have relied upon the judgment of Hon’ble Supreme Court in Union of India and Others Vs. M/s.Jesus Sales Corporation AIR 1996 SC 1509. Perusal of the judgment in the case of M/s. Jesus Sales Corporation (supra) shows that the observation was made by Hon’ble Supreme Court while interpreting 3rd proviso to Section 4 M(1) of the Imports and Exports (Control) Act 1947, which is reproduced below : “Provided also that, where the Appellate authority is of opinion that the deposit to be made will cause undue hardship to the appellant, it 3 may, at its discretion, dispense with such deposit either unconditionally or subject to such conditions as it may impose.” 11. The aforequoted 3rd proviso of Section 4 M (1) of the Act 1947 does not contemplate any opportunity of personal hearing in contrast to the provisions of Section 75(4) of the CGST/UPGST Act, 2017 which specifically mandates for opportunity of hearing before passing the order. The counter affidavit has been filed by an Officer of the rank of Joint Commissioner, Corporate Circle Commercial Tax, Bareilly who has either not read the aforesaid judgment of Hon’ble Supreme Court or was not able to understand it and in a casual manner the counter affidavit has been filed in complete disregard to the statutory mandate of Section 75(4) of the Act 2017. 12. It has also been admitted in the counter affidavit that except permitting the petitioner to reply to the show cause notice, opportunity of personal hearing has not been afforded to the petitioner. Thus the legislative mandate of Section 75(4) of the Act to the authorities to afford opportunity of hearing to the assessee i.e. to follow principles of natural justice, has been completely violated by the respondents while passing the

impugned order.

13.

The stand taken by the respondents in the counter affidavit that the writ petition is not maintainable as the petitioner has an alternative remedy of appeal under Section 107 of the Act, can also not be accepted inasmuch as it is settled law that availability of alternative remedy is not a complete bar to entertain a writ petition under Section 226 of the Constitution of India. Certain exceptions have been carved out by Hon’ble Supreme Court that a writ petition under Article 226 of the Constitution of India may be entertained even there is an alternative remedy. One of the principle in this regard is that if the order impugned has been passed in gross violation of principles of 4

natural justice. It is admitted case of the respondents that no opportunity of personal hearing, as contemplated under Section 75(4) of the Act, 2017, was afforded to the petitioner before passing the impugned order.

14.

During the course of hearing of this writ petition, learned standing counsel has produced before us a photo stat copy of the order of the Assessing Authority relating to the impugned order and perusal thereof shows that no opportunity of hearing as contemplated under Section 75(4) of the Act, 2017 was not afforded to the petitioner. Thus, there being patent breach of principles of natural justice, the present writ petition is maintainable against the impugned order.

15.

Article 226 of the Constitution of India confers very vide powers on High Courts to issue writs but this power is discretionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition. Some exceptions to the rule of alternative remedy as settled by Hon'ble Supreme Court are as under:- (i) Where there is complete lack of juri iction in the officer or authority to take the action or to pass the order impugned. (ii) Where vires of an Act, Rules, Notification or any of its provisions has been challenged. (iii) Where an order prejudicial to the writ petitioner has been passed in total violation of principles of natural justice. 5

(iv) Where enforcement of any fundamental right is sought by the petitioner. (v) Where procedure required for decision has not been adopted. (vi) Where Tax is levied without authority of law. (vii) Where decision is an abuse of process of law. (viii) Where palpable injustice shall be caused to the petitioner, if he is forced to adopt remedies under the statute for enforcement of any fundamental rights guaranteed under the Constitution of India. (ix) Where a decision or policy decision has already been taken by the Government rendering the remedy of appeal to be an empty formality or futile attempt. (x) Where there is no factual dispute but merely a pure question of law or interpretation is involved. (xi) Where show cause notice has been issued with preconceived or premeditated or closed mind.

16.

The above principles are supported by the law laid down by Hon'ble Supreme Court in the case of Himmatlal Harilal Mehta v. State of Madhya Pradesh, AIR 1954 SC 403, Collector of Customs v. Ramchand Sobhraj Wadhwani, AIR 1961 SC 1506, Collector Of Customs & Excise ,Cochin & Ors. vs A. S. Bava, AIR 1968 SC 13, Ltd. & Anr. vs. Jahan Khan (2007) 10 SCC 88 para 12, Dhampur 740 para 4; Paradip Port Trust vs Sales Tax Officer and Ors. (1998) 4 SCC 90, Feldohf Auto & Gas Industries Ltd. Vs. Union of India (1998) 9 SCC 710; Isha Beebi Vs. Tax Recovery Officer (1976) 1 SCC 70 (para 5); Whirlpool Corporation Vs. Registrar of Trademarks (1998) 8 SCC 1; Guruvayur Devasworn Managing Committee Vs C.K. Rajan (2003) 7 SCC 546 (para 67, 68), Oryx Fisheries Pvt. Ltd. Vs. Union of India & Others (2010)13 SCC 427 (Paras 27 to 38), VS. State of Maharashtra (2006) 12 SCC 33 (para 9 & 11), Tax No. 255 of 2012 (M/s Shree Bhawani Paper Mills Ltd. Vs. State Of U.P. and Another) decided on 10.09.2015, M/s. Rapti Commissions Agency Vs. Union of India (2010) 1 AllLJ. 710 :(2009) 244 ELT 8 and 2019-20) can not be sustained and is hereby quashed. 7

18.

Liberty is granted to the respondents to pass an order afresh in accordance with law, after affording opportunity of personal hearing to the petitioner.

19.

Writ petition is allowed to the extent indicated above with cost of Rs.10,000/-.

20.

A copy of this order be sent by the Registrar General of this Court to the Commissioner, Commercial Tax U.P. Lucknow who shall ensure that principles of natural justice as contemplated under Section 75(4) of the CGST/UPGST Act 2017 be followed by Proper Officers/Assessing Authorities in the State of Uttar Pradesh. Order Date :- 4.3.2022 vkg 8 GOSWAMI Date: 2022.03.09 09:52:10 IST Reason: Location: High Court of Judicature at Allahabad

Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.