CGST Act | Once Registration Is Cancelled, Uploading Notice On Portal Not Sufficient Notice, Must Be Given At Assesee's Address: Allahabad HC

The Allahabad High Court has held that once the registration of the assesee is cancelled, any notice for proceedings under the Central Goods and Service Tax Act, 2017 shall be served on the address of the assesee. The Court observed that merely uploading notice on the web portal without any intimation to the assesee will vitiate any subsequent action as being bad in law.

Elaborating on the need for judicious application of the principle of audi alteram partem in legal and administrative proceedings, the bench comprising of Justice Shekhar B. Saraf held,

“In the present case, when the petitioner had cancelled its registration in the year 2019, a proper notice was required to be issued to it under Section 74 of the Act at its address. However, the authorities simply uploaded the Section 74 show cause notice on the web portal inspite of knowing that the petitioner had already cancelled its registration prior to the date of issuance of the show cause notice. This action clearly prevented the petitioner from appearing in the hearing in the original proceeding under Section 74 of the Act that was accordingly passed ex parte.”

Factual Background

The petitioner approached the High Court challenging order passed by Assistant Commissioner, State Tax, Sector-2, Fatehpur under Section 74 of the Central Goods and Services Tax Act, 2017 for the tax period 2018-19 and the subsequent appellate order dated passed by the Additional Commissioner, Grade-2, (Appeal)-III, State Tax, Prayagraj.

Petitioner submitted that its GST registration was voluntarily cancelled on September 18, 2019. However, the Department uploaded the notice under Section 74 of the Act on the web portal on a subsequent date fixing 12^th January, 2021 as the date for personal hearing. It was argued that since petitioner's registration stood cancelled in 2019, it was not required to check the web portal.

Further, it was contended that the SIB report on the basis of which proceedings were initiated under Section 74 was never served upon the petitioner. It also argued that petitioner was not given a second opportunity to appear before the authorities before passing of the order.

High Court Verdict

The Court relied on State of Kerala v. K.T. Shaduli Grocery Dealer Etc., wherein the Supreme Court had emphasised the importance of serving documents on the assesee which are sought to be relied upon by the Department.

The Supreme Court had observed

“It will thus be noticed that this Court clearly laid down that while the Income-tax Officer was not debarred from relying on any material against the assessee, justice and fair-play demanded that the sources of information relied upon by the Income-tax Officer must be disclosed to the assessee so that he is in a position to rebut the same and an opportunity should be given to the assessee to meet the effect the aforesaid information.”

The Court placed further reliance on the decision of Supreme Court regarding observance of principles of natural justice in Dharampal Satyapal Limited v. Deputy Commissioner of Central Excise, Gauhati and others, Madhyamam Broadcasting Limited v. Union of India and others and State Bank of India and others v. Rajesh Agarwal and others to hold

“The common thread that runs across these judgments is that although the principle of audi alteram partem can evolve itself given the facts and circumstances of each case, its significance and applicability is universal. Audi alteram partem, which is a part of the doctrine of natural justice, finds its roots primarily in the constitutionally guaranteed ideal of equality.”

The Court observed that the observance of principles of natural justice is “sine qua non of due process, standing as an unwavering sentinel against the potential tyranny of unchecked power.”

The Court held that since the petitioner had cancelled its registration in 2019, the Department ought to have served the notice under Section 74 at the address of the petitioner. Simply uploading the notice on the web portal, with the knowledge of cancellation of registration prevented the petitioner from appearing before the authorities.

The Court held that service of notice was vitiated and was bad in law. Accordingly, the order under Section 74 and subsequent order of the appellate authority were set aside directing the petitioner to appear before the authority on 30^th January for hearing. The Court directed the Department to serve a copy of the SIB report to the petitioner

Case Title: M/S Eastern Machine Bricks And Tiles Industries vs. State Of U.P. And Others [WRIT TAX No. - 1507 of 2023]

Case citation: 2024 LiveLaw (AB) 14

Counsel for Petitioner: Aloke Kumar

Counsel for Respondent: Arvind Kumar Mishra

Click Here To Read/Download Order