M/S Ratan Industries Limited vs. State Of U.P. And 2 Others

Held

The Court held that the order dated 24.1.2019 and the subsequent appellate order dated 27.7.2020 were passed in complete violation of the principles of natural justice and statutory provisions. The Court found that the admission by the Respondents in their counter-affidavit regarding the show cause notice being sent to a wrong email address meant that the Petitioner was never properly served. The failure to serve a reasoned order quantifying the demand further compounded the violation. The Court reasoned that service of notice on an incorrect email address is not contemplated or deemed proper service under the Act. Consequently, the Petitioner was denied an opportunity to file a reply, and the entire process was arbitrary. The ratio decidendi is that non-service of a show cause notice and a reasoned order, especially when admitted by the revenue, vitiates the demand proceedings and violates fundamental principles of natural justice. The Court set aside both impugned orders and directed the Petitioner to file a reply to the show cause notice (annexed to the counter-affidavit) within four weeks, after which the Respondents could pass fresh orders after providing an opportunity of hearing.

Facts

M/s Ratan Industries Limited (Petitioner) filed a writ petition challenging an order dated 24.1.2019 by Respondent No. 3, demanding Rs. 91,450/- plus interest, and a subsequent order dated 27.7.2020 by the Appellate Authority (Respondent No. 2) dismissing the Petitioner's appeal on grounds of limitation. The Petitioner, engaged in manufacturing and selling auto parts, claimed to have paid taxes after deducting Input Tax Credit (ITC). They alleged that the demand order was passed without serving any show cause notice or the order itself. The Petitioner learned of the demand on 15.12.2019. While the Respondents filed a counter-affidavit annexing a show cause notice, they admitted it was sent to a wrong email address due to clerical inadvertence. Only a summary of the demand order was filed, not the reasoned order.

Key Issues

1. Whether the order dated 24.1.2019 demanding tax and interest was passed in violation of the principles of natural justice and statutory provisions, specifically concerning the non-service of a show cause notice and a reasoned order, as contemplated under the GST Act and Rules? Petitioner's arguments: The Petitioner contended that no show cause notice was ever served, nor was the demand order communicated to them. They argued that service of a show cause notice on a wrong email address, as admitted by the Respondents, does not constitute proper service under the Act. Furthermore, the absence of a reasoned order violates statutory requirements and natural justice. They approached the High Court as the GST Tribunal was not yet constituted, leaving them without a remedy. Respondent's arguments: The Respondents, through their counter-affidavit, admitted that the show cause notice was sent to a wrong email address due to clerical inadvertence. They did not provide a reasoned order, only a summary. No specific arguments were recorded for the Respondent regarding the validity of service or the absence of a reasoned order.