M/S. Bengal Engineering vs. State Of West Bengal Adn Ors.
Original PDF →Facts
M/s. Bengal Engineering, a contractor involved in public works under a Build-Operate-Transfer (BOT) model, appealed against an order confirming a tax demand under the West Bengal Goods and Services Tax Act, 2017. The dispute concerned the taxability of annuity payments received during the operation and maintenance phase for the period July 2017 to March 2018. The Adjudicating Authority initiated proceedings under Section 74, alleging wilful suppression of turnover amounting to Rs. 6,96,79,809, and confirmed a total demand of Rs. 1,36,52,489.08. This order was upheld ex-parte by the Appellate Authority. The Appellant challenged these orders before the Writ Court on procedural and jurisdictional grounds, leading to the impugned order.
Held
The Court held that the Adjudication Order suffered from fundamental jurisdictional and procedural breaches, rendering it illegal and unsustainable. Regarding the first issue, the Court found a direct contravention of Section 75(7), which imposes a jurisdictional ceiling. The confirmed tax of Rs. 83,61,577.08 exceeded the SCN amount of Rs. 75,65,693.00, making the increased demand ultra vires and vitiating the entire assessment order. The Court emphasized that statutory provisions prescribing limits to authority's power are mandatory. Concerning the second issue, the Court held that Section 75(4) mandates the grant of a personal hearing when requested, and its denial is not a mere irregularity but a fatal breach of natural justice. Citing Supreme Court precedents, the Court stated that denial of a mandatory personal hearing is a fundamental infirmity. The cumulative effect of the jurisdictional flaw under Section 75(7) and the procedural breach under Section 75(4), compounded by other noted issues, led to the conclusion that the assessment was fundamentally flawed. The appeal was allowed, the Adjudication and Appellate Orders were set aside, and the matter was remanded for de novo proceedings, with a specific direction to grant an effective personal hearing and ensure the final demand does not exceed the SCN amount.
Key Issues
1. Whether the Adjudication Order, which confirmed a tax liability of Rs. 83,61,577.08, exceeding the Rs. 75,65,693.00 specified in the Show Cause Notice (SCN), violates the jurisdictional ceiling under Section 75(7) of the West Bengal Goods and Services Tax Act, 2017, rendering the demand ultra vires. 2. Whether the Adjudicating Authority's failure to grant an effective personal hearing, despite an explicit request, constitutes a violation of the principles of natural justice and Section 75(4) of the Act, warranting the setting aside of the ex-parte order. Petitioner's Arguments: The Appellant argued that the assessment order suffered from two incurable statutory breaches. Firstly, the confirmed tax liability exceeded the SCN amount, violating Section 75(7). Secondly, the denial of a personal hearing, despite a specific request in the reply, breached Section 75(4) and principles of natural justice. The Appellant also contended that the authority displayed a non-application of mind by initiating parallel proceedings under Sections 73 and 74 and failing to issue pre-SCN intimation under Rule 142(1A). They prayed for quashing and remand. Revenue's Arguments: The Respondents argued that the enhancement in demand was a mere calculative error in bifurcating tax components and should not vitiate the proceedings. Regarding the personal hearing, they contended that the Appellant's reply was considered, documents were sufficient, and the denial was a mere irregularity, not a fatal infirmity. They argued the Writ Court should not interfere on procedural grounds.
Sections Cited
Section 73, Section 74, Section 75(4), Section 75(7), Rule 142(1A)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
order was subsequently confirmed by the Appellate Authority ex- parte on January 02, 2025. The Appellant subsequently approached the Writ Court challenging these assessment orders on fundamental procedural and juri ictional grounds, which led to the impugned order of the Learned Single Judge.
The central and determinative questions that fall for our consideration are: a. Whether the Adjudication Order, confirming a tax liability of Rs. 83,61,577.08 which is in excess of the amount of Rs. 75,65,693.00 specified in the Show
MAT 1541 OF 2025 Cause Notice, constitutes a violation of the mandatory juri ictional ceiling prescribed under Section 75(7) of the West Bengal Goods and Services Tax Act, 2017, thereby rendering the final demand ultra vires the notice and unsustainable in law. b. Whether the failure of the Adjudicating Authority to grant the Appellant an effective opportunity of personal hearing, despite an explicit request in the reply, constitutes a gross violation of the principles of natural justice and the mandatory provision of Section 75(4) of the Act, warranting the setting aside of the ex-parte final order.
Learned Counsel for the Appellant submitted that the assessment order is afflicted by dual, incurable statutory breaches. Firstly, he pointed out the patent juri ictional flaw: the Adjudicating Authority confirmed a tax liability of Rs. 83,61,577.08, which undeniably exceeded the amount of Rs. 75,65,693.00 specified in the SCN, in direct contravention of the clear prohibition contained in Section 75(7) of the Act. Secondly, he stressed the breach of natural justice, highlighting that the Appellant had explicitly requested a personal hearing in the Reply (FORM GST DRC-06 dated 02.12.2020), but the Adjudicating Authority proceeded to pass the final order ex-parte, violating the mandatory requirement of Section 75(4). Furthermore, he argued that the authority displayed a fundamental non-application of mind by MAT 1541 OF 2025 initiating parallel and contradictory proceedings under Section 73 and Section 74 for the same demand, besides failing to issue the mandatory pre-SCN intimation under Rule 142(1A). He prayed for the quashing of the assessment orders and a remand for de novo consideration.
Per contra, Learned Counsel for the Respondents sought to defend the impugned orders, arguing that the enhancement in the confirmed demand was merely a correction of a calculative error related to the bifurcation of the Central and State components of the tax, which ought not to vitiate the entire proceeding. Regarding the denial of the personal hearing, it was submitted that the Appellant’s reply was considered and the documents on record were sufficient to arrive at the conclusion, suggesting that the non-grant of a hearing constituted a mere irregularity and not a fatal infirmity, and that the Writ Court should not interfere in the finality of the assessment merely on procedural grounds.
Our examination must focus acutely on the mandatory nature of the provisions cited and the consequences of their non-adherence. The twin pillars of administrative fairness are juri iction and natural justice, and both appear to have been severely compromised in the instant case.
The first substantive question hinges on the direct contravention of Section 75(7), which operates as a MAT 1541 OF 2025 juri ictional ceiling. The provision unequivocally states that the amount confirmed in the final order shall not be in excess of the amount specified in the notice. The record establishes a clear and material difference: the tax confirmed (Rs.83,61,577.08) exceeded the tax charged in the SCN (Rs. 75,65,693.00). This increase, irrespective of the authority's post-facto justification of a calculation error, is a direct breach of the explicit language of the statute. II. DECISION ON SQL II: Violation of Section 75(4) (Breach of Natural Justice)
The principle is clear: the Adjudicating Authority cannot travel beyond the four corners of the Show Cause Notice. The Hon'ble Supreme Court has consistently held that statutory provisions prescribing limits to an authority's power are mandatory and non-compliance with them renders the action ultra vires. The final demand, being in excess of the SCN, is legally dismantled. This vitiates the entire assessment order, as the increased demand lacks the necessary statutory foundation.
The second question addresses the breach of the principles of audi alteram partem. Section 75(4) of the Act uses the imperative expression "shall be granted" where a request for a personal hearing is made. This converts the power to grant a hearing into a binding statutory duty upon the Adjudicating Authority once the Assessee
MAT 1541 OF 2025 makes an explicit request. The failure to respect this statutory command, particularly in a proceeding under Section 74 which involves an allegation of wilful suppression, is not a mere irregularity.
The Hon'ble Supreme Court in Kaveri Telecom been passed ex-parte despite the statutory mandate, is rendered unsustainable and liable to be set aside on this ground alone.
The cumulative effect of the juri ictional flaw under Section 75(7) and the procedural breach under Section 75(4), compounded by the non-application of mind evident in the parallel proceedings under Section 73 and Section 74, leads us to the inescapable conclusion that the assessment was fundamentally flawed.
Therefore, we are at definite conclusion that the Adjudicating Authority under the Goods and Services Tax Act is strictly bound by the juri ictional ceiling imposed by Section 75(7), and any demand confirmed in the final
MAT 1541 OF 2025 order that exceeds the tax amount specified in the Show Cause Notice is ultra vires and vitiates the order in toto, and the provision of Section 75(4), which mandates the grant of a personal hearing upon request, is absolute, and its denial constitutes a fatal breach of the principles of natural justice, necessitating the quashing of the ex- parte order, regardless of the merits of the demand.
We find that the assessment orders suffer from fundamental juri ictional and procedural breaches which render them illegal and unsustainable in the eyes of the law.
The appeal is, therefore, allowed.
Consequentially it is ordered that: i. The Adjudication Order in FORM GST DRC-07 dated December 10, 2020, and the subsequent Appellate Order in FORM GST APL-04 dated January 02, 2025, are hereby set aside and quashed in their entirety. ii. The matter is remanded to the file of the Adjudicating Authority (Deputy Commissioner of State Tax, Suri Charge) for a de novo proceeding commencing from the stage of the Appellant’s reply to the Show Cause Notice. iii. The Adjudicating Authority is expressly directed to afford the Appellant a fresh and effective opportunity of personal hearing as strictly mandated by Section MAT 1541 OF 2025 75(4) of the Act, within six weeks from the date of communication of this judgment. iv. The Adjudicating Authority shall, thereafter, pass a comprehensive speaking order on merits, strictly in accordance with law, ensuring that the findings specifically address: (i) the Appellant's substantive claim for exemption on annuity payments, and (ii) strict compliance with Section 75(7), guaranteeing that the final recoverable tax amount does not, under any circumstance, exceed the amount specified in the original SCN. v. The interim order passed by the Learned Single Judge on 03.09.2025 stands merged with this final judgment. vi. Any pre-deposit made by the Appellant shall be subject to the outcome of the fresh adjudication order, with necessary adjustments or refund being processed expeditiously.
The appeal is disposed of on the above terms. All pending applications are accordingly disposed of. There shall be no order as to costs.
All parties shall act on the server copy of this order, duly downloaded from official website of this Hon’ble Court.
(Uday Kumar, J.) (Rajarshi Bharadwaj, J.)
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.