I. Demand – Tax Period April 2018 to March 2019 – Lack of Personal Hearing and Appeal Dismissal on Limitation
Issue:
Whether an appeal dismissed on limitation grounds by the Appellate Authority, which deprived the petitioner of an adjudication on merits, should be set aside, especially when the initial demand order was passed without providing a personal hearing, and the Appellate Tribunal is yet to be constituted.
Facts:
For the tax period April 2018 to March 2019, a show cause notice was issued to the assessee. However, no personal hearing was granted before the order was passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) / West Bengal Goods and Services Tax Act, 2017 (WBGST Act). Subsequently, an appeal filed by the petitioner against this order was rejected by the Appellate Authority under Section 107 of the Act, ostensibly on limitation grounds, thereby depriving the petitioner of an adjudication on the merits of their case.
Decision:
In favor of the assessee (Matter remanded): The court held that the dismissal of the appeal on limitation grounds deprived the petitioner of an adjudication on merits, which runs contrary to the statutory scheme of the Act. The court noted that the Act permits a registered taxpayer a further opportunity to challenge the adjudication order, and since the Appellate Tribunal is yet to be constituted, it necessitates a thorough review at the appellate stage. Therefore, the matter was remanded back to the Appellate Authority for its adjudication on merits, ensuring redressal through appellate mechanisms.
Key Takeaways:
- Right to Personal Hearing (Section 73/75(4)): The principle of natural justice mandates that a personal hearing be granted, especially when requested or when an adverse order is contemplated. Passing an order under Section 73 without providing a hearing is a violation of this fundamental right.
- Adjudication on Merits in Appeal (Section 107(12)): The Appellate Authority is statutorily bound to consider an appeal on its merits and pass a speaking order, even if there are initial concerns about limitation. Dismissing an appeal solely on limitation without a thorough consideration of the reasons for delay or the merits of the case, particularly when higher appellate forums (like the Tribunal) are not yet fully functional, may be deemed unjust.
- Consequences of Lack of Appellate Tribunal: The non-constitution of the GST Appellate Tribunal plays a significant role in judicial decisions. Courts often remand cases back to the first appellate authority or grant other relief to ensure that taxpayers have an effective avenue for justice, as they cannot proceed to the next level of appeal.
- Remand for Fair Adjudication: When procedural infirmities exist at the original adjudication stage (lack of personal hearing) and the first appellate authority fails to address the appeal on its merits (dismissal on limitation without proper consideration), courts typically set aside both orders and remand the matter for fresh adjudication.
II. Provisional Attachment – Bank Account – Period April 2018 to March 2019 – Post Pre-deposit and Part Recovery
Issue:
Whether the provisional attachment of a bank account under Section 83 of the CGST Act is sustainable after the assessee has already made a pre-deposit for an appeal and a substantial amount has been recovered, especially when the tax liability is still under appeal.
Facts:
For the tax period April 2018 to March 2019, following the demand order under Section 73 and the subsequent appeal dismissal under Section 107 (as described in the first point), an order for the provisional attachment of the petitioner’s bank account was issued in Form GST DRC-13 (likely based on Section 83, though not explicitly stated but implied by the context of provisional attachment). The petitioner had paid Rs. 1,10,757/- as pre-deposit for the appeal, and an additional Rs. 18,79,96/- had already been recovered from the petitioner.
Decision:
In favor of the assessee: The court held that considering the scheme of the Act, which authorizes a registered taxpayer to maintain an appeal upon payment of 10 percent of the amount of tax in dispute, and given that the petitioner had already paid Rs. 1,10,757/- towards pre-deposit and an additional Rs. 18,79,96/- had already been recovered, the order of attachment of the petitioner’s bank account could not be sustained. Therefore, the attachment order issued in Form GST DRC-13 was set aside.
Key Takeaways:
- Purpose of Provisional Attachment (Section 83): Section 83 allows provisional attachment of property to protect the interest of the revenue during the pendency of proceedings. It is a drastic measure and should be invoked sparingly and only when there is a clear apprehension that the taxpayer might dispose of their assets to frustrate recovery.
- Impact of Pre-deposit and Recovery on Provisional Attachment: Once a taxpayer complies with the pre-deposit requirement for an appeal (typically 10% of the disputed tax) and especially when additional amounts have already been recovered, the justification for continuing a provisional attachment diminishes significantly. The intent of the pre-deposit is to safeguard revenue to some extent during the appeal process.
- Balancing Revenue Interest and Business Operations: Courts often balance the revenue’s interest in protecting its dues with the taxpayer’s right to operate their business. Continuing a bank account attachment after substantial recovery and pre-deposit can severely impede business operations and may be viewed as an arbitrary exercise of power when adequate safeguards for revenue are already in place.
- Attachment to be Proportional: Provisional attachment should be proportionate to the perceived risk to revenue. If a significant portion of the demand is already secured through pre-deposit or recovery, further attachment may be considered excessive.