Meridian Edutech Solutions Private Limited. vs. The Commissioner Of Central Tax

Facts

Meridian Edutech Solutions Private Limited (Petitioner) filed a writ petition challenging an order-in-original dated November 2, 2022, passed by the Commissioner of Central Tax, Ranga Reddy GST Commissionerate (Respondent). The order confirmed a demand of Rs. 3,12,00,000 under Section 73(2) of the Finance Act, 1994, imposed an equivalent penalty under Section 70, and levied interest for the period 2016-17 to June 2017. The Petitioner had submitted a reply to the show cause notice on April 20, 2022. The Respondent, however, admitted that the Petitioner's reply was not found on record and therefore not considered before passing the impugned order. The Petitioner sought to declare the order illegal and arbitrary and to prevent the attachment of its bank accounts.

Held

The Court held that the impugned order-in-original dated November 2, 2022, was liable to be set aside due to the non-consideration of the Petitioner's reply to the show cause notice. The Court appreciated the fair submission made by the Respondent's counsel. The Court found that the principles of natural justice were violated as the Petitioner's defense was not taken into account. Consequently, the Court set aside the impugned order and remanded the matter back to the Respondent. The Respondent was directed to take the Petitioner's reply on record, grant a personal hearing to the Petitioner's authorized representative, and pass a fresh order in accordance with law within eight weeks from the date of receipt of a copy of the order. The ratio decidendi is that an order passed without considering a party's reply to a show cause notice, when such consideration is mandated by law or principles of natural justice, is unsustainable. The Petitioner's prayer for setting aside the order and for a direction not to attach bank accounts was granted in effect by the remand and the direction for a fresh order.

Key Issues

1. Whether the order-in-original dated November 2, 2022, passed by the Respondent is illegal, arbitrary, and violative of the principles of natural justice, particularly concerning the non-consideration of the Petitioner's reply to the show cause notice, thereby contravening Section 73(2) of the Finance Act, 1994? Petitioner's Contention: The Petitioner argued that the Respondent failed to consider its reply to the show cause notice before passing the impugned order, which is a violation of natural justice and the relevant provisions of the Finance Act, 1994. This failure renders the order illegal and arbitrary. Respondent's Contention: The Respondent, through its counsel, fairly submitted that the Petitioner's reply was not found on record and thus was not considered. The Respondent agreed to consider the reply and pass a fresh order in accordance with law.