M/S Manjeet Cotton PVT. LTD. vs. Commissioner Of State Tax

Held

The Court noted that while the Petitioner had requested an adjournment and was granted 15 days, they admittedly neither filed a written response nor appeared on the granted date of February 11, 2022. The Petitioner also did not pursue the matter thereafter. The Court found that the Petitioner could not be considered naive enough not to follow up on the show cause notice, especially after search proceedings. However, acknowledging the Petitioner's desire to approach the Appellate Authority and the potential for condoning the delay, the Court allowed the petition. The impugned order under Section 73 was permitted to be challenged before the Appellate Authority (Respondent No. 6) within two weeks of receiving the order. The Appellate Authority was directed to decide the appeal expeditiously on its merits, without being guided by any findings or observations in this order, and provide due opportunity to the Petitioner. The Petitioner would be entitled to seek re-credit of the amount recovered from their bank account, barring the pre-deposit amount, which the authority would decide. Until then, no further coercive recovery would be made, and the Petitioner could operate their bank account.

Facts

M/s Manjeet Cotton Pvt. Ltd. (Petitioner), engaged in trading cotton products, received a show cause notice dated January 13, 2022, from Respondent No. 3 under Section 73 of the CGST/GGST Act. The notice alleged non-reversal of Input Tax Credit (ITC) related to nil-rated or exempted supplies, demanding ₹36,15,696 plus interest. The Petitioner requested a 30-day adjournment, which was granted for 15 days, with a reply due by February 11, 2022. The Petitioner failed to file a detailed reply or appear on that date, citing the last date for filing GST returns. Subsequently, search proceedings under Section 67(2) were conducted on February 17, 2022, and the Petitioner's statement was recorded on February 19, 2022. On February 21, 2022, the Petitioner reversed ITC amounting to ₹1,19,149 for the period 2017-18 to 2020-21. The Petitioner later discovered, in June 2022, that the demand had been recovered by debiting their electronic credit ledger and that a notice under Section 79(1)(c) had been issued to their bank, freezing their account.

Key Issues

1. Whether the impugned order passed under Section 73 of the CGST Act is liable to be quashed and set aside for violation of the principles of natural justice, specifically the opportunity of hearing, as contemplated under Section 75(4) of the CGST Act? 2. Whether the Petitioner is entitled to challenge the finalized assessment before the Appellate Authority, and if so, whether the delay in filing the appeal should be condoned? Petitioner's Arguments: - The Petitioner argued that the opportunity of hearing was not adequately provided, violating Section 75(4) of the CGST Act, relying on the High Court's decision in Special Civil Application No. 11332 of 2022. They contended that even without a specific request, a personal hearing is mandatory when an adverse decision is contemplated. Revenue's Arguments: - The Learned AGP argued that the portal indicated an adjournment and personal hearing were granted on February 11, 2022. However, the Petitioner neither filed a reply nor appeared, leading the officer to pass the order after sufficient compliance. The Petitioner's failure to avail the opportunity, not the officer's, was the reason for the order.