Sangeetha Match Works vs. The State Tax Officer(Inspection Cell)

Facts

The petitioner, M/s. Sangeetha Match Works, challenged assessment orders dated 19.11.2019 for the assessment years 2017-2018 and 2018-2019, passed by the State Tax Officer (Inspection Cell), Virudhunagar. The petitioner received a show cause notice on 11.10.2019, detailing 33 defects for 2017-2018 and 38 defects for 2018-2019. The petitioner requested an extension of 15 days on 26.10.2019 to consult their auditor, followed by another request for 30 days on 11.11.2019. The respondent rejected these requests without assigning reasons and passed the assessment orders. The petitioner contended that the orders were passed arbitrarily, violating principles of natural justice, and without sufficient opportunity to reply. The respondent argued that personal hearing was afforded, procedures were followed, and the petitioner failed to avail the opportunity, suggesting a statutory appeal as the sole remedy.

Held

The Court held that the principles of natural justice were violated. It was not disputed that the petitioner's representations dated 26.10.2019 and 11.11.2019, seeking further time to reply to the show cause notice, were received by the respondent. The Court found the petitioner's reason for seeking extension – to consult an auditor regarding numerous defects pointed out after a 22-day spot inspection – to be genuine and constituting sufficient cause, as contemplated under Section 75(5) of the CGST Act, 2017. The respondent failed to consider the genuineness of the reason or assign any reasons for rejecting the extension requests in their correspondence or the impugned assessment orders. The assessment orders were passed within a short span of just over a month from the show cause notice. The Court found that a fair hearing was not afforded. Relying on a previous High Court judgment in Tvl. Steel Mart Private Limited, the Court quashed the impugned assessment orders. However, considering the tax demand of approximately Rs. 1 Crore, the Court directed the petitioner to pay Rs. 5,00,000/- to the respondent on or before 11.01.2021. Upon payment, the assessment orders would stand quashed, and the matter would be remanded to the respondent for fresh consideration, affording sufficient opportunity and personal hearing to the petitioner within twelve weeks.

Key Issues

1. Whether the assessment orders dated 19.11.2019 were passed in violation of the principles of natural justice by rejecting the petitioner's requests for extension of time to reply to the show cause notice without assigning reasons? (Question of law and fact, turning on Section 75(5) of the CGST Act, 2017 and principles of natural justice). Petitioner's arguments: The petitioner argued that the respondent arbitrarily rejected their genuine requests for time to consult an auditor and provide a detailed reply to the numerous defects pointed out in the show cause notice. They relied on Section 75(5) of the CGST Act, 2017, which mandates granting time if sufficient cause is shown and recording reasons for adjournment. They also cited a previous High Court judgment in Tvl. Steel Mart Private Limited Vs. The Commercial Tax Officer, where similar circumstances led to quashing of assessment orders. The petitioner contended that the assessment orders were passed mechanically and without proper application of mind. Respondent's arguments: The respondent contended that sufficient opportunity was granted, personal hearing was afforded but not availed by the petitioner, and procedures under the GST Act were followed. They argued that no valid reason was provided for extension, and the petitioner's only remedy was a statutory appeal.