Chatterjee Concern And Anr. vs. State Of West Bengal And Ors.

Facts

The petitioners, Chatterjee Concern and another, are challenging an order dated May 9, 2024, passed by the appellate authority under Section 107 of the West Bengal Goods and Services Tax Act, 2017/Central Goods and Services Tax Act, 2017. This order dismissed their appeal against an adjudication order dated March 25, 2023, ex-parte. The adjudication order held the petitioner liable for excess claim of Input Tax Credit (ITC), interest, and penalty. The petitioners' authorized representative appeared on the first hearing date, August 3, 2023, and requested an adjournment, which was granted, with the next date fixed for October 5, 2023. On October 5, 2023, the petitioner remained unrepresented. The petitioners explained this absence in a supplementary affidavit, stating their tax consultant was seriously indisposed due to prostate cancer. The appellate authority passed the ex-parte order approximately seven months after the adjourned date.

Held

The Court held that the principles of natural justice were not fairly complied with in this case. It noted that the appellate authority did not pass the impugned order on a date proximate to the adjourned hearing date. The Court accepted the explanation provided in the supplementary affidavit regarding the tax consultant's serious medical condition, including hospitalization for prostate ailments, making it reasonable to believe that this led to the absence on October 5, 2023. Furthermore, the Court found that the appellate authority's decision to increase the quantum of penalty from Rs. 1,000/- to Rs. 10,000/- without affording the petitioners a reasonable opportunity of showing cause against the proposed enhancement was a violation of the first proviso to Section 107(11) of the said Act of 2017. Consequently, the appellate order dated May 9, 2024, was set aside solely on these grounds. The matter was remanded to the appellate authority for a fresh decision on merits, with the petitioners being permitted to file an additional reply, which the appellate authority must consider. The Court explicitly stated that it had not gone into the merits of the petitioners' case.

Key Issues

1. Whether the appellate authority erred in dismissing the appeal ex-parte without granting a further opportunity to the petitioner to present its case, despite the absence of its representative being due to serious illness, and considering the significant delay in passing the ex-parte order? 2. Whether the appellate authority erred in increasing the penalty from Rs. 1,000/- to Rs. 10,000/- without affording the petitioner an opportunity of hearing on the proposed enhancement, thereby violating Section 107(11) of the said Act of 2017? Petitioner's Arguments: Mr. Ray, for the petitioners, argued that the appellate order is unsustainable. He contended that even though the petitioner could not be represented on the adjourned date, the appellate authority ought to have provided at least one more opportunity to present their case, especially since the order was passed after a considerable delay. He further submitted that the increase in penalty from Rs. 1,000/- to Rs. 10,000/- without a hearing is in direct contravention of Section 107(11) of the Act. The petitioners relied on the Supreme Court judgment in Rafiq and Another vs. Munshilal and Another, (1981) 2 SCC 788, for the principle that a litigant should not suffer for the fault of their advocate. State's Arguments: Mr. Sanyal, for the respondents/GST authorities, argued that the impugned order was passed in accordance with law and did not warrant any interference.