M/S. Gopi Enterprise vs. Union Of INDIA

Facts

The writ applicants, M/s. Gopi Enterprise and its partner, challenged two actions by Respondent No. 2: the blocking of their Input Tax Credit (ITC) and an order dated 13.11.2020 demanding Rs. 61,47,499/- towards tax. The applicants argued that the demand order was passed without proper assessment proceedings. During the hearing, the respondent's counsel submitted that the blocked ITC ledger had been unblocked. The petitioner's counsel contended that unblocking the ITC did not resolve the dispute, as the demand order was issued without assessment. The Court noted that any tax liability fixation requires a show cause notice under Section 73 or 74, followed by assessment proceedings and an opportunity for hearing.

Held

The Court held that the impugned letter dated 13.11.2020 was unsustainable as it was passed without proper assessment proceedings. The Court reasoned that fixation of tax liability must commence with a show cause notice under Section 73 or Section 74 of the Act, followed by full-fledged assessment proceedings, including an opportunity for the assessee to be heard, before a final order is passed. The Court found that in this case, a final liability had been fixed without adhering to these procedural requirements. Consequently, the Court quashed and set aside the impugned communication dated 13.11.2020, reserving liberty for the respondents to initiate fresh proceedings in accordance with law concerning the alleged liability of the writ applicants.

Key Issues

1. Whether the impugned letter dated 13.11.2020, passed by Respondent No. 2, is a valid final assessment order, considering it was issued without proper assessment proceedings? (Question of law and mixed fact and law, turning on principles of natural justice and assessment procedures under the GST Act). Petitioner's Arguments: The petitioner argued that the letter dated 13.11.2020 was a final assessment order passed without any assessment proceedings, and therefore, it was invalid. They contended that even though the ITC might have been unblocked, the department could still attempt to recover the amount demanded in the letter, which they sought to prevent. Revenue's Arguments: The respondent's counsel stated that the electronic credit ledger, which was blocked, had been unblocked. No specific argument was recorded regarding the validity of the demand order itself.