Tvl. Nallathambi Construction And Engineering Works vs. The Deputy State Tax Officer 1

Facts

The petitioner, Nallathambi Construction and Engineering Works, filed two writ petitions challenging orders dated July 31, 2023, and August 16, 2023, passed by the Deputy State Tax Officer-1. These orders pertain to tax periods 2018-2019 and 2022-2023. The petitioner contended that the notices preceding these orders were hosted on the GST common portal and went unnoticed due to the petitioner's limited familiarity with the portal's architecture. The petitioner, described as a small-time operator, claimed it could demonstrate the unreasonableness of the confirmed demand if given an opportunity. The petitioner also expressed willingness to deposit 10% of the disputed tax. The respondent argued for dismissal, citing Supreme Court decisions and the limitation period for appeals.

Held

The Court allowed the writ petitions, quashing the impugned orders dated July 31, 2023, and August 16, 2023. The Court exercised its discretion in favour of the petitioner, taking into account the petitioner's submission regarding the notices going unnoticed on the GST portal and the petitioner's willingness to deposit 10% of the disputed tax. The quashed orders were to be treated as an addendum to the show cause notice. The petitioner was directed to file a reply within 30 days of receiving the order and to pay the 10% disputed tax amount from its Electronic Cash Ledger within the same period. The respondent was directed to pass final orders on merits within three months thereafter. The Court also ordered the de-freezing of the petitioner's bank account upon recovery of the 10% amount, provided funds were available. The ratio decidendi is that procedural fairness and principles of natural justice, including effective communication of notices, are paramount, and High Courts can exercise discretion to grant relief even if procedural lapses occur, especially when a party demonstrates a willingness to comply with financial obligations and present their case.

Key Issues

1. Whether the impugned orders, passed without affording a personal hearing to the petitioner, are liable to be quashed for violating the principles of natural justice, particularly in light of the notices being hosted on the GST common portal and allegedly going unnoticed by the petitioner? (Question of law and fact, turning on principles of natural justice and procedural fairness under GST law). Petitioner's arguments: The petitioner argued that the impugned orders should be quashed because they were passed without providing a personal hearing. They contended that the notices were not effectively communicated as they were only available on the GST portal, which the petitioner, a small operator, was not fully conversant with. They asserted that an opportunity to present their case would show the demand was unjust. They also offered to deposit 10% of the disputed tax. Respondent's arguments: The respondent argued that the writ petitions should be dismissed, relying on the Supreme Court's decision in Assistant Commissioner (CT) LTU, Kakinada and others Vs. Glaxo Smith Kline Consumer Health Care Limited. They further submitted that any appeal against the impugned orders would be time-barred under Section 107 of the TNGST Act, 2017, citing the Supreme Court's ruling in M/S. Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur and others.