Appeal to appellate authority restored due to condoned 192-day delay, caused by proprietor’s ill-health

Appeal to appellate authority restored due to condoned 192-day delay, caused by proprietor’s ill-health and reliance on accountant unaware of proceedings.

Issue:

Whether a High Court should set aside an appellate order dismissing an appeal on grounds of limitation (192 days delay) and condone the delay, thereby restoring the appeal for hearing on merits, when the assessee (a manufacturer) claims the delay was due to their lack of GST knowledge, reliance on a part-time accountant who failed to inform them of proceedings, and specifically, the proprietor’s ill-health.

Facts:

• The petitioner-assessee, a manufacturer of wooden products, had an ex-parte order dated May 20, 2024, passed against them under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) (dealing with demands involving fraud, misstatement, or suppression). This order was due to the petitioner’s absence from a personal hearing.
• The petitioner filed an appeal against this demand order before the appellate authority.
• However, the appellate authority rejected the appeal solely on the ground of limitation, as it had been filed with a delay of 192 days.
• The petitioner filed a writ petition challenging both the original demand order and the appellate order rejecting the appeal.
• The petitioner’s explanation for the delay was:
  • Lack of GST knowledge.
  • Lack of portal access.
  • Full reliance on a part-time accountant who failed to inform them about assessment proceedings.
  • Specifically, the ill-health of the proprietor of the petitioner.

Decision:

The court held in favor of the assessee. It observed that the delay had occurred primarily due to the ill-health of the proprietor of the petitioner. The court further held that the petitioner had demonstrated a “reasonable cause” for the delay. Therefore, in view of these facts, the delay of 192 days in filing the appeal before the appellate authority was condoned, and the appellate order dismissing the appeal on limitation was set aside. The matter was implicitly remanded for a fresh hearing on merits by the appellate authority. The writ petition was disposed of.

Key Takeaways:

• Condonation of Delay: Courts have the power to condone delays in filing appeals if a “sufficient cause” or “reasonable cause” is shown. This power is exercised to ensure substantive justice is not defeated by procedural technicalities.
• “Reasonable Cause” for Delay: Ill-health of the proprietor or key personnel, coupled with reliance on an external professional who fails to communicate, is generally considered a reasonable cause for delay. The court recognized the practical difficulties faced by small businesses.
• Emphasis on Merits over Technicality: The court’s decision prioritizes providing the assessee an opportunity to contest the substantial demand (under Section 74, which implies serious allegations) on its merits, rather than letting the appeal be dismissed on a technical ground of limitation.
• Ex-parte Order Context: The fact that the original demand order was passed ex-parte (due to absence from personal hearing) further strengthens the argument for providing a subsequent opportunity at the appellate level, especially when the absence itself is explained by a reasonable cause.
• Scope of Writ Jurisdiction: High Courts exercise their writ jurisdiction to correct injustices arising from procedural errors or when there’s a failure to apply discretion properly (e.g., in condoning delay).
• Restoration of Appeal: The setting aside of the appellate order implies that the original appeal is restored to the file of the appellate authority, which will now hear it on its substantive merits.
• Importance of Timely Compliance: While delay was condoned here, it serves as a reminder of the critical importance of timely compliance and monitoring of tax proceedings. However, genuine hardships are considered by courts.