M/S. Vj Enterprises vs. The Deputy Commissioner (GST Appeals) (State Tax)

Held

The Court held that while the action against the petitioner for producing fake invoices was admittedly initiated, the procedure followed was flawed. The Court noted that the show cause notice was issued only through the web portal and was in English, which could be a barrier for uneducated small-scale entrepreneurs who are not accustomed to handling advanced technologies like e-mails. The Court observed that such notices, if not understood, become an empty formality. Therefore, the impugned order dated 03.05.2023 was set aside. The Court directed the respondents to issue a fresh show cause notice in the regional language, either through registered post or SMS, to enable the petitioner to understand the issue and contest the case. The Court also suggested that the Department should explore issuing notices in regional languages and via SMS and registered post to ensure uneducated traders can respond.

Facts

M/s. VJ Enterprises, a registered taxpayer, is challenging an order dated 03.05.2023 passed by the State Tax Officer, Nanguneri. The order demanded Rs. 15,26,874/- as tax, interest, and penalty for allegedly producing fake invoices from Golden Traders, Chennai, to claim Input Tax Credit (ITC) for the financial year 2020-2021. The action was based on a statement from the proprietor of Golden Traders admitting to issuing invoices without supplying goods. The petitioner claims they did not receive the show cause notice issued through the GST portal and consequently failed to appear for the personal hearing. The petitioner is a scrap purchaser.

Key Issues

1. Whether the show cause notice issued solely through the GST portal, without ensuring actual receipt or understanding by an uneducated taxpayer, constitutes a valid opportunity for personal hearing as required by law? (Question of law and fact, concerning principles of natural justice and procedural fairness under the GST Act). Petitioner's arguments: The petitioner contended that the action was initiated based on the statement of a third party and that they were not provided with a proper opportunity for personal hearing. They argued that the show cause notice was issued only through the GST portal, which they failed to notice, leading to their non-appearance. Revenue's arguments: The respondents argued that a show cause notice was issued under Section 74(1) of the Tamil Nadu Goods and Service Tax Act, 2017, and an opportunity for personal hearing was provided as per Section 75(4) of the Act. They asserted that since the petitioner failed to avail this opportunity, the impugned order was passed based on the available materials.