Writ petition against GST penalty for alleged fraud is dismissed as appealable, with directions to provide documents to the assessee for the appeal.

Writ petition against GST penalty for alleged fraud is dismissed as appealable, with directions to provide documents to the assessee for the appeal.

Issue:

Whether a writ petition challenging an order imposing a penalty under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) should be entertained by the High Court when the assessee claims non-receipt of notice for personal hearing and denial of three personal hearings, especially when the order is appealable under Section 107 of the CGST/DGST Act, 2017.

Facts:

• A notice was issued to the assessee alleging that they had received goods less invoices from two fake and fraudulent firms and had consequently availed Input Tax Credit (ITC) improperly.
• An Order-in-Original was subsequently passed, imposing a penalty upon the assessee.
• The assessee filed a writ petition challenging this order, asserting two main grounds:
  1. The notice for personal hearing was not received by the assessee.
  2. The assessee was not connected with the owner of the alleged fake firms.
  3. The assessee claimed that three personal hearings were not provided, as supposedly contemplated by Section 75(5) of the CGST Act.
• The court observed that the assessee’s own averment in the writ petition belied the claim that the personal hearing notice was not received.
• Regarding the claim of three hearings, the court interpreted Section 75(5) as merely contemplating a maximum of three adjournments, not a mandatory entitlement to three personal hearings.
• The impugned order imposing the penalty was, admittedly, an appealable order under Section 107 of the CGST/DGST Act.

Decision:

The court ruled in favor of the revenue. It held that the assessee’s allegation of non-receipt of the personal hearing notice was contradicted by their own petition. Furthermore, Section 75(5) only limits the number of adjournments, not guarantees three hearings. Since the impugned order was an appealable order, the assessee was relegated to the appellate authority for filing an appeal. The court, however, directed the department to make available to the assessee all documents relied upon by the department.

Key Takeaways:

• Alternate Remedy/Exhaustion of Remedies: High Courts generally do not entertain writ petitions when an effective alternate statutory remedy (like an appeal) is available. The principle is that the assessee must first exhaust the remedies provided under the specific statute.
• Exceptions to Alternate Remedy Rule: While there are exceptions (e.g., violation of natural justice, jurisdiction issues, no effective remedy), the court found these exceptions not applicable here.
• “Audi Alteram Partem” (Right to be Heard): The court scrutinized the assessee’s claim of denied personal hearing. The assessee’s own admission in the petition that they knew about the notice (even if they claimed not to have physically received it) weakened their argument of natural justice violation.
• Interpretation of Section 75(5) of CGST Act: This section states, “No adjournment shall be granted to a person concerned, more than three times during the course of any proceedings under this Act.” The court clarified that this provision sets a limit on adjournments, not a right to three hearings. The authority is required to provide a reasonable opportunity of hearing, but not necessarily three separate hearings.
• Scope of Writ Jurisdiction in Penalty Cases: Writ jurisdiction is supervisory, not appellate. The High Court typically does not go into the merits of the allegations (like whether the firms were fake or assessee’s connection) in a writ petition when an appeal mechanism exists for such factual disputes.
• Ensuring Fair Appeal: Despite dismissing the writ, the court ensured that the assessee would have a fair chance at appeal by directing the department to provide all relied-upon documents, addressing a potential natural justice concern at the appellate stage. This reinforces the idea that principles of natural justice are paramount throughout the process.