Alkem Laboratories Limited vs. Union Of INDIA

Facts

Alkem Laboratories Limited (the petitioner) filed a writ application challenging an order dated October 21, 2020, passed by the Assistant Commissioner of State Tax (Enforcement), Vadodara (Respondent No. 2). This order fixed the petitioner's liability for service tax with penalty. The petitioner also challenged a recovery notice dated December 17, 2020, and the attachment of its factory premises under Section 79 of the CGST Act, 2017, which was a consequence of the October 21, 2020 order. The petitioner contended that the order was passed in violation of the principles of natural justice as no opportunity of personal hearing was granted. The Revenue argued that ample opportunities were given but not availed. The High Court decided to entertain the writ application despite the existence of an appeal remedy under Section 107 of the Act, due to the alleged violation of natural justice.

Held

The Court held that the impugned order dated October 21, 2020, was passed in violation of the principles of natural justice. It was unequivocally established that no opportunity of personal hearing was granted to the writ applicant, despite a specific written request for it. The Court referred to Section 75(4) of the CGST Act, 2017, emphasizing that an opportunity of hearing must be granted when a written request is received from the person chargeable with tax or penalty. Furthermore, the Court noted that the recovery proceedings, including the attachment of the factory premises, were initiated prematurely, as Section 78 of the Act stipulates a three-month period from the date of service of the order before recovery proceedings can commence. The Court found that the attachment was initiated within one month. Consequently, the impugned order and the subsequent order of attachment were quashed and set aside. The matter was remitted to the respondent No. 2 for fresh consideration, with directions to issue a notice fixing a specific date for hearing, allowing the petitioner to make submissions. The Court explicitly stated that it had not gone into the merits of the matter, focusing solely on the procedural irregularity of the denial of a hearing.

Key Issues

1. Whether the impugned order dated October 21, 2020, passed by the Assistant Commissioner of State Tax (Enforcement) was violative of the principles of natural justice, specifically concerning the grant of a personal hearing to the petitioner? (Question of law and fact, turning on Section 75(4) of the CGST Act, 2017). Petitioner's contention: The petitioner argued that no opportunity of personal hearing was provided before the impugned order was passed, despite a specific written request for the same. They relied on Section 75(4) of the CGST Act, 2017, which mandates a hearing when requested in writing. The petitioner also highlighted that the recovery proceedings initiated via notice dated December 17, 2020, were premature as they were initiated within one month of the order, contrary to Section 78 of the Act. Revenue's contention: The learned AGP for the State-respondents argued that ample opportunities were given to the petitioner, but these were not availed. The affidavit-in-reply indicated that notices in FORM DRC-01A and FORM GST DRC-01 were issued, and the petitioner had filed replies.