Opportunity to appeal granted for excess ITC demand despite limitation, as assessee claimed non-receipt of SCN.

Opportunity to appeal granted for excess ITC demand despite limitation, as assessee claimed non-receipt of SCN.

Issue:

When a demand for excess Input Tax Credit (ITC) has been raised against an assessee via an impugned order, and the assessee claims they never received the Show Cause Notice (SCN) and only learned of the SCN and order much later (upon visiting the department’s office), whether the High Court should permit the assessee to file a belated appeal, even if it is technically barred by limitation.

Facts:

• A demand for excess Input Tax Credit (ITC) was raised against the assessee through an impugned order.
• The assessee’s core contention was that they never came to know of the Show Cause Notice (SCN) that preceded the demand order.
• Consequently, no reply was filed to the SCN, and the impugned order was passed by the respondent authority without the assessee’s participation.
• The assessee claimed they only became aware of both the SCN and the impugned order when they visited the respondent authority’s office for another unrelated matter.
• The assessee sought permission from the court to file an appeal challenging the impugned order.
• The respondents, however, argued that any such appeal would be barred by limitation.

Decision:

The court ruled in favor of the assessee. It recognized that the assessee faced a substantial demand and, considering the nature of the demand, deserved an opportunity to assail the order on its merits and present their stand. While the impugned order itself was not interfered with directly by the writ court, the assessee was permitted to file an appeal against the impugned demand, specifically considering that the assessee came to know of the order very late.

Key Takeaways:

• Principles of Natural Justice (Service of Notice): The primary concern here is the alleged non-service of the SCN. If the assessee genuinely did not receive the SCN, it constitutes a fundamental violation of the principles of natural justice (right to be heard).
• High Court’s Discretion in Limitation: While appeals typically have strict limitation periods, High Courts, under their extraordinary writ jurisdiction (Article 226 of the Constitution), can grant relief in exceptional circumstances to prevent injustice, especially when there’s a demonstrable lack of notice or opportunity.
• Balancing Interests: The court balanced the revenue’s interest (in prompt resolution and respecting limitation periods) with the assessee’s right to defend themselves against a substantial demand. By not quashing the order directly but allowing a belated appeal, the court ensured that the merits could still be agitated before the appropriate appellate forum.
• “Nature of Demand”: The court’s phrasing “considering nature of demand” suggests that the financial impact on the assessee (a substantial demand) played a role in its decision to grant a concession on limitation.
• Effective Remedy at Appellate Stage: The court recognized that the appellate authority (under Section 107) is the appropriate forum to examine the merits of the demand and the factual aspects of non-service of notice, including condoning delay if sufficient cause is shown.
• Implication for Department: This judgment implicitly highlights the importance for tax authorities to maintain proper records of service of SCNs and orders, as claims of non-receipt can lead to judicial intervention and extension of appeal periods.