Writ Petition Not Entertained Due to Assessee’s Lack of Diligence in Responding to Show Cause Notice for Fraudulent ITC

Writ Petition Not Entertained Due to Assessee’s Lack of Diligence in Responding to Show Cause Notice for Fraudulent ITC

Issue: Whether a writ petition challenging an order confirming demand, interest, and penalty for fraudulent Input Tax Credit (ITC) is maintainable when the assessee failed to respond to multiple show cause notices and opportunities for personal hearing, and an effective appellate remedy is available.

Facts:

• Two show cause notices were issued to the assessee, alleging fraudulent availment of Input Tax Credit (ITC) without the actual receipt of goods.
• The notices demanded the ITC amount, along with interest and penalty.
• The assessee failed to file a reply to the show cause notices, even after notices for personal hearings were issued.
• Personal hearings were fixed on three different dates.
• The assessee only sought to join on the very last date, that too for the purpose of seeking an extension.
• No reply was filed to the show cause notice even after the alleged access to the personal hearing was not granted (implying the assessee perhaps claimed they couldn’t attend, but still didn’t submit a written reply).
• Subsequently, an order was passed confirming the demand along with interest and imposing a penalty.

Decision: The court held that the impugned order did not warrant interference in writ jurisdiction. It was noted that the order was appealable under Section 107 of the CGST Act. Considering that the department had given the assessee show cause notices and multiple personal hearing notices, and the assessee had not been diligent in responding or appearing, the department could not be held to blame for not giving a “proper hearing.” The decision was in favor of the revenue.

Key Takeaways:

• Exhaustion of Alternate Remedy: The primary reason for dismissing the writ petition was the availability of an effective appellate remedy under Section 107 of the CGST Act. Writ jurisdiction is typically exercised only in exceptional circumstances.
• Due Process and Assessee’s Diligence: Tax authorities are required to provide due process, which includes issuing show cause notices and opportunities for hearing. However, there is a corresponding expectation that the assessee will be diligent in availing these opportunities.
• Consequences of Non-Compliance: Failure to submit a timely reply to a show cause notice or to attend scheduled personal hearings, especially when multiple opportunities are provided, can lead to the passing of an ex-parte order.
• “Proper Hearing” Implies Assessee’s Participation: The court’s finding that the department could not be blamed for “not giving a proper hearing” implies that a proper hearing was, in fact, offered, but the assessee failed to utilize it effectively. A “proper hearing” doesn’t guarantee the assessee’s desired outcome, but rather the provision of a fair opportunity to present their case.
• No Interference for Assessee’s Own Laches: Courts are generally reluctant to intervene in writ jurisdiction when the petitioner’s own lack of diligence or failure to pursue available remedies is the reason for the adverse order.
• Factual Dispute and Appellate Authority’s Role: The underlying dispute regarding fraudulent ITC likely involves factual matrix which is best scrutinised by the first appellate authority (Commissioner Appeals) under Section 107, which has the power to review facts and law.