Arcelormittal Nippon Steel INDIA LTD. vs. Assistant Commissioner

Held

The Court held that both the show cause notices and the subsequent rejection orders were in clear violation of the principles of natural justice and statutory requirements. The show cause notices, by merely stating "other" with a remark of "error in adjusted total turnover," were found to be vague and lacked the fundamental details necessary for the petitioner to comprehend and respond. The Court noted that the respondent's affidavit-in-reply could not defend the inadequacy of these notices. Consequently, any opportunity to file a reply or attend a personal hearing would have been futile. The rejection orders were also found to be non-speaking and passed without bearing in mind the requirement of giving reasons. The Court emphasized that a vague notice weakens the foundation of any proceeding, making any superstructure built upon it unsustainable. The Court chose not to delve into the merits of the refund claims but instead remanded the matter. The Deputy Commissioner was directed to process the refund applications afresh after providing the petitioner with an opportunity of a personal hearing within two weeks. The Court also suggested in-house training for officers discharging quasi-judicial functions.

Facts

The petitioners, Arcelormittal Nippon Steel India Ltd., filed two refund applications on February 3, 2020, for unutilized compensation cess amounting to Rs. 9,53,26,364/- and Rs. 4,57,285/- for supplies made to a Special Economic Zone (SEZ) during July 2019 to September 2019. The Assistant Commissioner issued show cause notices on March 4, 2020, and March 11, 2020, proposing rejection of these refund applications under Rule 92(3) of the CGST Rules, citing "other" reasons and "error in adjusted total turnover." The petitioners contend these notices were vague and lacked specific reasons, preventing them from filing an effective reply or attending the personal hearing scheduled for March 16, 2020. Subsequently, rejection orders were passed on March 23, 2020, without providing an opportunity for a personal hearing or assigning detailed reasons. The petitioners approached the High Court seeking to quash these notices and orders.

Key Issues

1. Whether the show cause notices dated 04.03.2020 and 11.03.2020, issued under Rule 92(3) of the CGST Rules, are legally valid and comply with principles of natural justice by providing sufficient reasons for proposing the rejection of the refund claims? 2. Whether the rejection orders dated 23.03.2020, passed without affording the petitioner an opportunity of personal hearing and without assigning adequate reasons, are sustainable in law? Petitioner's arguments: The petitioner argued that the show cause notices were vague, merely stating "other" and "error in adjusted total turnover" without specifying the nature of the error. This lack of clarity prevented them from filing a proper reply or participating effectively in the personal hearing. They contended that the subsequent rejection orders were non-speaking and passed in violation of natural justice principles. They relied on the principle that a notice is the foundation of any proceeding and must be clear and specific. Respondent's arguments: The respondent argued that the writ jurisdiction under Article 226 should not be invoked to short-circuit statutory remedies, citing the case of Assistant Collector of Central Excise vs. M/s. Dunlop India Limited and Others. They claimed that an appeal remedy was available before the Joint Commissioner. The respondent denied the absence of reasons, stating that a speaking order had been passed and was available online. They also asserted that the petitioner was afforded an opportunity for personal hearing, which they chose not to avail.