M/S Harilal Agarwalla vs. State Tax Officer, Kendrapara Circle

Facts

The petitioner, M/s. Harilal Agarwalla, filed a writ petition before the Orissa High Court challenging an order dated March 17, 2026, passed by the State Tax Officer, Kendrapara Circle, Cuttack-II, under Section 74 of the GST Act. This order raised a demand of Rs. 1,50,094/- for the period April 2019 to March 2020. The petitioner had previously filed a reply on October 27, 2023, to a show-cause notice dated October 27, 2023, issued by the Deputy Commissioner of State Tax, which alleged a liability of Rs. 1,29,624/-. The petitioner clarified that the amount not reflected in GSTR 3B pertained to the release of securities and that the taxable amount for work executed was correctly reflected as Rs. 31,06,834/-. The petitioner contended that the impugned order was passed without a further opportunity to explain their reply and documents, violating principles of natural justice.

Held

The Court held that the petitioner had furnished documents along with their reply, explaining that there was no mismatch in the tax liability. It was perceived that the petitioner was entitled to one opportunity to explain the details of their transactions. Consequently, without delving into the disputed question of fact, the Court deemed it appropriate to set aside the order dated March 17, 2026, passed by the State Tax Officer. The matter was remanded to the State Tax Officer for fresh adjudication. The petitioner was directed to appear before the authority within fifteen days of the order with a copy of the order and relevant documents. The authority was directed to pass an appropriate order within one month from the date of the petitioner's appearance, affording an opportunity of personal hearing. The petitioner was also directed to cooperate and participate in the proceedings without seeking unnecessary adjournments. No issue was expressly left undecided.

Key Issues

1. Whether the order dated March 17, 2026, passed by the State Tax Officer, Kendrapara Circle, Cuttack-II, is illegal, arbitrary, and unsustainable in law for violating the principles of natural justice, as argued by the petitioner? 2. Whether the petitioner was deprived of an adequate opportunity to explain their reply and supporting documents concerning the alleged mismatch in tax liability? The petitioner argued that the order was passed in flagrant violation of the principles of natural justice, as they were not given a further opportunity to explain their reply and documents. They contended that had they been given a chance, they could have persuaded the authority that there was no mismatch. The petitioner relied on Form 26AS to support their claim that the amount of Rs. 31,06,834/- was not suppressed. The revenue, represented by the Standing Counsel, vehemently opposed the petitioner's contentions, submitting that there was no infirmity in the order dated March 17, 2026.