Facts of the Case

The petitioner, Hindustan Construction Company Ltd., challenged two orders dated 24.06.2022 passed by the Joint Commissioner, State GST, Rajasthan. One order imposed interest and penalty, while the other imposed interest on account of delayed payment of GST.

The petitioner contended that a detailed reply had been submitted against the show cause notice along with a request for personal hearing. However, the adjudicating authority passed the impugned orders without properly considering the written reply and without passing a reasoned speaking order.

The petitioner also alleged violation of the mandatory provisions contained under Section 75 of the CGST Act and the principles of natural justice.

Issues Involved

  1. Whether an adjudication order can be sustained when the adjudicating authority fails to consider the detailed written reply submitted by the taxpayer.
  2. Whether passing a non-speaking order violates Section 75(6) of the CGST Act, 2017.
  3. Whether the assessment order is liable to be quashed for violation of the principles of natural justice.
  4. Whether failure to assign reasons while confirming GST demand, interest and penalty renders the order legally unsustainable.

Petitioner's Arguments

  • The petitioner submitted that a comprehensive reply to the show cause notice had already been filed.
  • A specific request for personal hearing had also been made before adjudication.
  • The adjudicating authority failed to consider the explanations contained in the reply.
  • The impugned orders were passed without proper application of mind.
  • The orders did not discuss the petitioner's submissions and therefore violated Section 75(6) of the CGST Act, which mandates that every adjudication order must state the relevant facts and the basis of the decision.
  • Consequently, the orders were arbitrary, non-speaking and contrary to the principles of natural justice.

Respondent's Arguments

  • The State submitted that the petitioner had admittedly deposited GST with delay and therefore liability towards interest and penalty arose under law.
  • The department produced the original dispatch register before the High Court to establish that notice for personal hearing had been dispatched and served upon the petitioner's representative.
  • It was argued that the petitioner had already appeared on 30.05.2022, filed its reply and was informed that the next date of hearing would be 22.06.2022.
  • Since nobody appeared on the scheduled date, the adjudicating authority proceeded ex parte.
  • The respondents maintained that there was no mala fide intention on the part of the officer while passing the orders.
  • However, the State could not dispute that the detailed written submissions filed by the petitioner had not been discussed in the impugned orders.

Court Findings / Order

The Rajasthan High Court observed that although the dispute regarding service of hearing notice stood clarified, the adjudicating authority had admittedly failed to consider the detailed written reply submitted by the petitioner.

The Court held that the impugned orders were sketchy, non-speaking and passed without application of mind.

The Court further held that Section 75(6) of the CGST Act makes it mandatory for the proper officer to state the relevant facts and the basis of the decision in every adjudication order.

Since the impugned orders neither discussed the petitioner's defence nor recorded reasons for rejecting the submissions, they violated the statutory mandate under Section 75(6) as well as the principles of natural justice.

Accordingly, the High Court:

  • Quashed and set aside both impugned orders.
  • Directed the petitioner's representative to appear before the Joint Commissioner on 22.12.2022.
  • Directed the adjudicating authority to provide an opportunity of hearing.
  • Directed passing of a fresh, reasoned and speaking order after considering the petitioner's written reply and oral submissions.
  • Discharged the show cause notice issued to the Joint Commissioner.
  • Allowed both writ petitions without any order as to costs.

Important Clarification

This judgment reiterates that:

  • Section 75(6) of the CGST Act is mandatory.
  • Every GST adjudication order must contain proper reasoning.
  • Merely issuing a hearing notice is not sufficient if the authority ignores the taxpayer's written submissions.
  • A non-speaking assessment order is liable to be quashed.
  • Reasoned orders are an integral component of the principles of natural justice.
  • Failure to discuss the taxpayer's defence constitutes non-application of mind and renders the order unsustainable in law.

Sections Involved

  • Section 75(6) of the Central Goods and Services Tax Act, 2017
  • Section 75 – General Provisions relating to Determination of Tax
  • Principles of Natural Justice

Link to download the order -

https://mytaxexpert.co.in/uploads/1782969021_171compressed.pdf

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