A penalty order passed within seven days of issuing a show-cause notice is invalid.
Penalty Order Quashed; Violation of Natural Justice and Statutory Time Limit
Issue: Whether a penalty order confirming a previously collected penalty amount is valid when it was passed within the statutory seven-day period provided to the assessee to respond to the show cause notice, and whether this constitutes a violation of natural justice.
Facts:
- Goods were being transported from Telangana to Karnataka when they were stopped by the respondent authority in Andhra Pradesh.
- The petitioner paid a penalty and got the goods and vehicle released.
- Subsequently, the respondent authority issued a show cause notice on October 29, 2024, to confirm the previously collected penalty amount.
- The petitioner filed a response on October 31, 2024, arguing that they had seven days to respond, but the respondent had foreclosed this time and issued notices for a personal hearing before the seven-day period expired.
- On November 5, 2024, the respondent authority passed an order confirming the penalty amount already collected.
Decision:
- The court held that the penalty order was passed within the seven-day period provided under the notice issued to the petitioner, which is a clear procedural violation as Form GST MOV-07 stipulates a seven-day period for responding to the show cause notice under Section 129(3).
- The court also held that this amounted to a violation of the principles of natural justice as adequate opportunity was not given to the petitioner.
- Consequently, the penalty order was set aside.
Key Takeaways:
- Statutory Time Limit: The statutory time limit provided to respond to a show cause notice must be strictly adhered to.
- Violation of Natural Justice: Passing an order without providing adequate opportunity to respond to the show cause notice violates the principles of natural justice.
- Procedural Violation: A clear procedural violation, such as passing an order within the statutory response period, invalidates the order.
- Opportunity to Respond: Assessees must be given a fair and reasonable opportunity to respond to show cause notices.
- Form GST MOV-07: The form itself stipulates the time period for replying to the notice, and the authority must adhere to that time period.
- The court is reinforcing the need for tax authorities to follow the correct legal procedures and to uphold the principles of natural justice.
HIGH COURT OF ANDHRA PRADESH
SFC Environmental Technologies Ltd.
v.
Union of India
R. Raghunandan Rao and MAHESWARA RAO KUNCHEAM, JJ.
WRIT PETITION NO. 29748 of 2024
DECEMBER 18, 2024
Sai Sundeep Manchikalapudi, for the Petitioner.
ORDER
R. Raghunandan Rao, J. – The petitioner, is in the business of providing solutions for Environmental Technology, especially sewage treatment and municipal solid waste treatment. The petitioner is said to have placed an order for certain components on a manufacturer, situated in Telangana State. When the goods were being transported from Telangana to the premises of a customer of the petitioner, in Karnataka, the goods were stopped by the 4threspondent, in Andhra Pradesh, and process was initiated for seizure and confiscation of the said goods. At that stage, the petitioner is said to have paid the penalty payable in such cases and got the goods and vehicle released.
2. Subsequently, the 4th respondent issued a show cause notice, dated 29.10.2024, calling upon the petitioner to show cause why the penalty amount collected earlier, should not be confirmed against the petitioner. In response to this show cause notice, the petitioner filed a response, dated 31.10.2024. In this response, the petitioner took the stand that the time, as statutorily available to the petitioner, to furnish the response to the show cause notice is seven days, despite which, the 4threspondent had foreclosed the same and sent notices of personal hearing even before the earlier seven days period is over.
3. Subsequently, the 4th respondent passed an order, dated 05.11.2024, confirming the penalty amount which has already been collected from the petitioner. Aggrieved by the same order, the petitioner had approached this Court.
4. The learned Government Pleader for Commercial Taxes submits that this Writ Petition is not maintainable in view of the Judgment of a Division Bench of this Court, dated 01.02.2022, in W.P.No.2260 of 2022, wherein the Division Bench, following the Judgment of the Hon’ble Supreme Court in The State of Uttar Pradesh & others v. M/s. Kay Pan Fragrance Pvt. Ltd.,(2020) 5 SCC 811 had held that writ petitions should not be entertained against the orders of seizure and confiscation and that the petitioners therein should be relegated to the regular remedies under the relevant Act.
5. This Judgment, may not be applicable to the present case, in as much as the main contention caused by the petitioner is on questions of violation of principles of natural justice and violation of the minimum period, of seven days, granted under the notice issued to the petitioner.
6. In the present case, the show cause notice was issued on 29.10.2024, while the order of penalty was passed on 05.11.2024, within the aforesaid period of seven days provided under the notice issued to the Petitioner.
7. Form GST MOV 07 issued under Section 129(3) of the CGST Act stipulates that time of seven days is given for answering the show cause notice.
8. In the circumstances, there is a clear procedural violation prescribed under the Act. Apart from the same, it would also amount to violation of principles of natural justice as adequate opportunity has not been given to the petitioner.
9. Consequently, the order of penalty, dated 05.11.2024, bearing GST MOV-07 passed by the 4th respondent is set aside and the matter is remanded back to the 4th respondent to pass necessary orders after due opportunity of hearing and opportunity of making out its case is given to the petitioner, in accordance with law.
10. Accordingly, this Writ Petition is allowed. There shall be no order as to costs.
11. As a sequel, miscellaneous petitions, pending if any, shall stand closed.