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Madras High Court Orders
Release of Bank Attachment: Failure to Provide a Proper Opportunity for a
Personal Hearing Before Confirming Tax Demand Violates the Principles of
Natural Justice
By Yogesh
Verma (CS/LLB) / 2 min. read / GST Case
Law
Case Title: M/s. Om Sakthi Leather Finishers vs
Union of India & Others
Case Numbers: W.P.
Nos. 22242 & 22244 of 2024
Date of
Order: 06.08.2024
Name of the
Court: High Court of Judicature at Madras
Presiding
Judge: The Hon'ble Mr. Justice Krishnan Ramasamy
Summary of the Case: The
petitioner, M/s. Om Sakthi Leather Finishers, filed writ petitions seeking the
quashing of an order that locked their bank account without prior notification
and the impugned show cause notice issued through the GST portal. The court
observed that the petitioner was not afforded a personal hearing and directed a
fresh consideration of the case upon the payment of 10% of the
disputed tax.
Facts of the Case:
1. M/s. Om Sakthi Leather
Finishers is engaged in leather finishing and is a registered taxpayer under
the GST Act.
2. The petitioner
allegedly utilised Input Tax Credit (ITC) in contravention of Section 16(4) of
the CGST Act, 2017.
3. The third respondent
issued a show cause notice on 30.09.2023 via the GST portal, but the petitioner
did not notice it and therefore did not respond.
4. The third respondent
passed an order on 31.12.2023, confirming the proposal in the show cause
notice.
5. The petitioner only
became aware of this when attempting to withdraw funds from their bank account,
which had been locked as per a letter dated 13.05.2024 from the third
respondent to the bank.
6. The petitioner claimed
they were not provided the original show cause notice or an opportunity for a
hearing, leading to a violation of natural justice.
Submission by
Petitioner:
The petitioner's counsel,
Mr. G. Derrick Sam, submitted that the petitioner was unaware of the show cause
notice as it was uploaded to a specific section of the GST portal and not
communicated directly. The petitioner agreed to deposit 10% of the disputed tax
and requested an opportunity to establish their case.
Submission by
Respondent:
The third respondent,
represented by Government Advocate Mr. V. Prashanth Kiran, did not oppose the
request for a rehearing, provided the petitioner deposited 10% of the disputed
tax demand.
Findings and Judgement of
the Court:
1. The court noted that
the show cause notice was issued through the GST portal, but the petitioner was
not aware of it, nor was the original notice furnished to them.
2. The court observed
that the impugned order had been passed without providing the petitioner an
opportunity for a personal hearing, which violated the principles of natural
justice.
3. The court set aside
the impugned order dated 31.12.2023, contingent on the petitioner depositing
10% of the disputed tax amount within four weeks.
4. The petitioner was
directed to file a reply with supporting documents within two weeks of
depositing the amount.
5. The third respondent
was instructed to provide the petitioner with a reasonable opportunity for a
personal hearing and to pass fresh orders based on merits within four weeks of
receiving the petitioner's reply.
Conclusion:
The court set aside
the impugned order and directed a fresh hearing of the case, granting
relief to the petitioner by allowing the release of their bank account and
ensuring an opportunity for them to present their case.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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