Avexa Corporation Private Limited Vs State of Andhra Pradesh and Others (Andhra Pradesh High Court)
Date: August 18, 2024
Subject Matter
Order passed even before the 30-day response period for the show cause notice had expired is quashed
Summary
In this case, the petitioner, a business entity registered under the CGST and APGST, faced cancellation of registration effective from August 31, 2023. Following the cancellation, the petitioner sought revocation on October 30, 2023, but it was rejected on November 24, 2023. After an appeal, the registration was restored on January 22, 2024. Meanwhile, the tax authorities issued an intimation on October 13, 2023, under Section 61, due to discrepancies in returns from 2017 to 2023, requiring the petitioner to either pay certain tax amounts or explain the discrepancies. On December 19, 2023, a fresh intimation was sent under Section 74, highlighting a significant discrepancy of over 31 crore rupees and followed by a show cause notice demanding payment of over 32 crore rupees. The petitioner requested additional time to prepare a detailed response. However, on January 24, 2024, the tax authority issued an order confirming the tax demand even before the 30-day response period for the show cause notice had expired and before the petitioner could log into the tax department's website to verify necessary details. The petitioner contested the order, citing violation of the principles of natural justice, as they were not afforded the opportunity to effectively respond or prepare their case due to the timing of the orders and the conditions of their registration status. The court concluded that the impugned order was invalid due to the violation of natural justice principles. It allowed the writ petition, set aside the penalty proceedings, and directed the tax authorities to provide the petitioner with adequate time and opportunity to respond to the show cause notice and conduct a proper assessment.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
Heard Sri B. Adinarayana Rao, learned Senior Counsel representing Sri Javvaji Sarath Chandra, learned counsel appearing for the petitioner and learned Government Pleader for Commercial Tax for respondents.
2. The petitioner, who was registered under the CGST and APGST Acts, was carrying on business within the State of Andhra Pradesh. The registration of the petitioner had been cancelled, by proceedings dated 28.10.2023, with effect from 31.08.2023. Initially, the petitioner sought revocation, of the cancellation of registration, by application dated 30.10.2023. This application for revocation was rejected, by order dated 24.11.2023. Subsequently, the petitioner filed an appeal against these proceedings, which came to be allowed on 22.01.2024.
3. While the proceedings for restoration of registration were pending, the 2nd respondent had issued an intimation under Section 61 of the A.P. Goods & Services Tax Act, 2017 (for short ‘the APGST Act’) dated 13.10.2023 calling upon the petitioner either to pay certain tax amount or to explain why such payment need not be made as there were various discrepancies found in the returns filed by the petitioner for the years 20172018 to 2022-2023. The petitioner responded to this intimation seeking time.
4. Subsequently, the 2nd respondent issued a fresh intimation dated 19.12.2023 under Section 74 of the APGST Act, pointing to a discrepancy of Rs.31,20,23,862/-. Thereafter, a show cause notice dated 26.12.2023 was issued by the 2nd respondent to the petitioner-company demanding an amount of Rs.32,51,66,267/-, on account of discrepancies in the returns filed by the petitioner or to explain, by filing written objections, within 30 days, why such amount should not be collected from the petitioner.
5. The 2nd respondent, in the same show cause notice dated 26.12.2023, had also requested the petitioner to choose a date for personal hearing out of three dates, viz., 04.01.2024 or 18.01.2024 or 24.01.2024.
6. The petitioner, after receipt of this show cause notice, had approached the 2nd respondent and submitted a letter, dated 22.01.2024, requesting the 2nd respondent to restore the registration of the petitioner, in view of the orders of the appellate authority setting aside the cancellation of registration and to grant time to the petitioner to log into the website of the tax department for the purpose of verification of details and for resetting the e-way bill password and for issuance of e-invoices. The petitioner requested two weeks time for filing a detailed reply, after being able to log into the website of the department.
7. The 2nd respondent passed an order dated 24.01.2024 confirming the demand raised in the show cause notice and the petitioner was called upon to pay the tax and penalty determined under the said order dated 24.01.2024.
8. The petitioner has approached this Court, by way of the present writ petition challenging the said order dated 24.01.2024 issued by the 2nd respondent primarily on the ground of violation of principles of natural justice.
9. Sri B. Adinarayana Rao, would submit that the impugned order, dated 24.01.2024, suffers from various infirmities. Firstly, the show cause notice, dated 26.12.2023, had granted 30 days time to the petitioner to respond. However, the impugned order has been passed 24.01.2024 even before the period of 30 days had elapsed. Secondly, the petitioner, by letter dated 22.01.2024, had sought time for responding to the show cause notice, dated 26.12.2023, and also for restoration of the registration of the petitioner. However, this letter, which is clearly not a submission of objections, has been treated as a response to the show cause notice. Thirdly, the presence of the authorized representatives at the office of the 2nd respondent, for submission of the letter dated 22.01.2024, has been treated as if the petitioner had availed the opportunity of personal hearing.
10. Sri B. Adinarayana Rao, learned Senior Counsel would also point out that the options given by the 2nd respondent are dated 04.01.2024, 18.01.2024 and 24.01.2024 whereas the personal hearing said to have been availed by the petitioner is on 22.01.2024, which is not in accord with the show cause notice of the 2nd respondent itself.
11. The learned Government Pleader for Commercial Tax would submit that the letter of the petitioner dated 22.01.2024 was in response to the earlier letter dated 13.01.2023. He would submit that the petitioner being fully aware of the show cause notice dated 26.12.2023 had chosen not to respond to the show cause notice and had responded only to an earlier proceedings. He would submit that the conduct of the petitioner in deliberately refusing to respond to the show cause notice dated 26.12.2023 disentitles the petitioner for any relief from this Court.
12. The requirement of administrative authorities to follow the principles of natural justice is founded on the simple principle that the person on whom action is proposed, should be given the opportunity to set out his case against such proposed action. This would require that, the person against whom action is proposed is informed of the entire case against him and the material that is proposed to be used against him is also furnished to him. Thereafter, the affected person should be given adequate opportunity to make out his case against the proposed action. This would mean that the affected person should be given an opportunity to gather all the material that he proposes to use against the proposed action. Any variation or violation of this requirement would amount to violation of principles of natural justice, which would render the proposed proceedings invalid.
13. In the present case, the notice was issued on 26.12.2023 granting 30 days time. The impugned assessment order has been passed even before the said period has been elapsed. The petitioner was entitled to gather all the material required for his defense. This would mean that the petitioner would have to be given access to the website of the department, after restoration of registration, with adequate time being given to the petitioner to gather all the details such as e-way bills, e-invoices, etc. In the present case, such an opportunity was not given to the petitioner as the appellate authority’s order, restoring registration, was passed on 22.01.2024 and the impugned order has been passed on 24.01.2024.
14. In the circumstances, this Court is of the opinion that there has been violation of principles of natural justice rendering the impugned order invalid.
15. Accordingly, this writ petition is allowed setting aside the impugned/penalty proceedings of the 2nd respondent bearing reference Nos.ZD370124015440Z (2017-20), ZD370124015404V (2018-19), ZD370124015419K (2019-20), ZD370124015424T (2020-21), ZD370124015431Y (2022-23)dated 24.01.2024 leaving it open to the 2nd respondent to undertake assessment proceedings for tax and penalty, on the basis of the show cause notice dated 26.12.2023. However, such proceedings would be taken up after giving adequate opportunity of hearing to the petitioner by way of granting two weeks time from today to the petitioner to file his objections to the show cause notice. Thereafter, a personal hearing will also be granted to the petitioner. Needless to say the order of assessment shall contain assessment of tax and penalty, if any, shall contain reasons. There shall be no order as to costs.
As a sequel, pending miscellaneous applications, if any, shall stand closed.