Facts of the Case

The appellant, Shri Kaushal Kadel, challenged the adjudication order passed under Section 74(9) of the West Bengal GST Act, 2017, primarily contending that the order violated the principles of natural justice. According to the appellant, only a summary order had initially been communicated, while the complete speaking order was not served. It was also argued that the adjudication order was non-speaking and lacked proper reasoning.

During the hearing before the Single Bench, the speaking order dated 19 February 2021 was supplied to the appellant. Since an online appeal could not be filed before the appellate authority, the Single Bench permitted the appellant to file a physical statutory appeal.

Dissatisfied with this direction, the appellant preferred intra-court appeals before the Division Bench.

Issues Involved

  1. Whether the adjudication proceedings suffered from violation of the principles of natural justice.
  2. Whether the appellant had been granted an effective opportunity to submit a proper reply and avail personal hearing.
  3. Whether the adjudication order under Section 74(9) should be set aside or an alternative remedy should be adopted.
  4. Whether the order could be treated as an additional show cause notice for fresh adjudication.

Petitioner's Arguments

  • The adjudication order was passed without proper communication of the complete speaking order.
  • The order violated the principles of natural justice.
  • The order was non-speaking and failed to adequately deal with the appellant's defence.
  • The appellant was not afforded an effective opportunity of personal hearing before passing the adjudication order.
  • Merely directing the appellant to pursue the statutory appellate remedy would not cure the procedural defects committed during adjudication.

Respondent's Arguments

The State contended that:

  • The appellant had an effective statutory appellate remedy available.
  • All issues could appropriately be raised before the First Appellate Authority.
  • Therefore, the Single Bench rightly directed the appellant to file the statutory appeal instead of interfering with the adjudication order.

Court Order / Findings

The Calcutta High Court observed that although the appellant had submitted a reply to the show cause notice, the reply merely asserted innocence without specifically addressing the allegations contained in the notice. The Court noted that such a vague response could not be treated as an adequate defence.

However, the Court also held that the opportunity available before the original adjudicating authority cannot be equated with the opportunity available in appeal. Since it appeared that no effective personal hearing had been granted before passing the adjudication order, the principles of natural justice required that the appellant be given one more opportunity.

Instead of quashing the adjudication order, the Court adopted a balanced approach by directing that the adjudication order dated 19 February 2021 be treated as an additional show cause notice.

The appellant was permitted to file a detailed objection within two weeks.

The Deputy Commissioner of State Tax was directed to:

  • grant a proper opportunity of personal hearing;
  • consider the fresh reply independently;
  • pass a fresh speaking order strictly on merits;
  • remain uninfluenced by the earlier adjudication order; and
  • conclude the proceedings preferably within six weeks after completion of the personal hearing.

Accordingly, the appeals were disposed of by modifying the order passed by the Single Bench.

Important Clarification

This judgment reiterates that:

  • An appellate remedy does not substitute the requirement of a fair adjudication before the original authority.
  • Personal hearing forms an important component of the principles of natural justice in GST proceedings.
  • Even where the taxpayer's earlier reply is inadequate, authorities should ensure that sufficient opportunity is granted before finalising proceedings.
  • Instead of setting aside an assessment order outright, courts may treat the order as an additional show cause notice to balance procedural fairness with administrative efficiency.
  • Fresh adjudication must be conducted independently through a reasoned speaking order.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785388850_2274compressed.pdf

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