Facts:The respondent-assessee challenged a show cause notice dated 29.07.2024 issued under Section 74 of the CGST Act demanding tax, interest and penalty for the financial years 2017-18 to 2023-24 through a single consolidated notice. The Single Judge permitted the authority to pass an order for FY 2017-18 within limitation and directed separate adjudication orders for the remaining years. The department filed a writ appeal challenging that direction.Court Decision:The Division Bench held that under Section 74 of the CGST Act the determination of tax is linked to the financial year to which the alleged tax evasion relates, and the limitation for passing adjudication orders is computed separately for each financial year from the due date of filing the annual return.The Court held that although the statute does not expressly prohibit issuance of a consolidated show cause notice, the proper officer should ideally issue separate notices for different financial years because the limitation for adjudication differs for each year. A consolidated notice covering several financial years could prejudice the assessee by curtailing the effective time available for defence and evidence.Finding no error in the reasoning of the Single Judge, the Court dismissed the writ appeal and upheld the direction permitting separate adjudication orders for each financial year after granting opportunity of hearing.Cases Referred by Court: CIT v. Simon Carves Ltd., (1976) 4 SCC 435
Joint Commissioner (Intelligence & Enforcement) & Anr. vs Lakshmi Mobile Accessories 05-02-2025
Facts:The respondent-assessee challenged a show cause notice dated 29.07.2024 issued under Section 74 of the CGST Act demanding tax, interest and penalty for the financial years 2017-18 to 2023-24 through a single consolidated notice. The Single Judge permitted the authority to pass an order for FY 2017-18 within limitation and directed separate adjudication orders for the remaining years. The department filed a writ appeal challenging that direction.Court Decision:The Division Bench held that under Section 74 of the CGST Act the determination of tax is linked to the financial year to which the alleged tax evasion relates, and the limitation for passing adjudication orders is computed separately for each financial year from the due date of filing the annual return.The Court held that although the statute does not expressly prohibit issuance of a consolidated show cause notice, the proper officer should ideally issue separate notices for different financial years because the limitation for adjudication differs for each year. A consolidated notice covering several financial years could prejudice the assessee by curtailing the effective time available for defence and evidence.Finding no error in the reasoning of the Single Judge, the Court dismissed the writ appeal and upheld the direction permitting separate adjudication orders for each financial year after granting opportunity of hearing.Cases Referred by Court: CIT v. Simon Carves Ltd., (1976) 4 SCC 435
Case Facts:The petitioner challenged an order dated 28 January 2025 passed under Section 83 of the MGST Act attaching its bank account. The department alleged wrongful availment of Input Tax Credit (ITC) under Section 17(5)(d) and initiated proceedings under Section 67. The petitioner contended that the issue was purely legal and relied on judicial precedent and CBIC guidelines. It was argued that the attachment severely impacted business operations and lacked proper justification. Court Decision:The Court held that the power under Section 83 is drastic and must be exercised strictly in accordance with statutory conditions. It observed that no material was placed on record to show that the petitioner was likely to defeat the demand or that attachment was necessary to protect revenue. The impugned order was found to be based on insufficient reasoning and amounted to a colourable exercise of power. Upon instructions, the State agreed to withdraw the attachment order. The Court set aside the order and directed immediate operation of the bank account. Cases Referred by Court:Radha Krishan Industries vs State of Himachal PradeshSafari Retreats (Supreme Court judgment referred in context of ITC eligibility)
Goisu Realty Pvt. Ltd. vs State of Maharashtra & Ors. 31-01-2025
Case Facts:The petitioner challenged an order dated 28 January 2025 passed under Section 83 of the MGST Act attaching its bank account. The department alleged wrongful availment of Input Tax Credit (ITC) under Section 17(5)(d) and initiated proceedings under Section 67. The petitioner contended that the issue was purely legal and relied on judicial precedent and CBIC guidelines. It was argued that the attachment severely impacted business operations and lacked proper justification. Court Decision:The Court held that the power under Section 83 is drastic and must be exercised strictly in accordance with statutory conditions. It observed that no material was placed on record to show that the petitioner was likely to defeat the demand or that attachment was necessary to protect revenue. The impugned order was found to be based on insufficient reasoning and amounted to a colourable exercise of power. Upon instructions, the State agreed to withdraw the attachment order. The Court set aside the order and directed immediate operation of the bank account. Cases Referred by Court:Radha Krishan Industries vs State of Himachal PradeshSafari Retreats (Supreme Court judgment referred in context of ITC eligibility)
Facts:The petitioner challenged the show cause notice dated 29.07.2024 issued under Section 74 of the CGST Act proposing tax, interest and penalty for the financial years 2018-19 to 2023-24. The petitioner apprehended that the authorities would pass a composite adjudication order covering multiple financial years and sought direction for passing separate orders and granting opportunity for cross-examination.Court Decision:The Court held that at the stage of show cause notice there was no material to assume that the authorities would adopt a procedure contrary to law or deny opportunity of hearing. Therefore, interference with the show cause notice was not warranted.However, considering the limitation period for passing order for the financial year 2017-18, the Court permitted the authority to pass an order for that year within the prescribed limitation after granting opportunity of hearing. For the subsequent financial years, the Court observed that separate adjudication orders ought to be issued for each year even if the show cause notice is composite, and directed the authority to pass separate orders after granting reasonable opportunity of hearing. The writ petition was disposed of with these directions.Cases Referred by Court:· W.P.(C) No.35156 of 2024 (Kerala High Court)
Lakshmi Mobile Accessories vs Joint Commissioner (Intelligence & Enforcement) & Anr. 28-01-2025
Facts:The petitioner challenged the show cause notice dated 29.07.2024 issued under Section 74 of the CGST Act proposing tax, interest and penalty for the financial years 2018-19 to 2023-24. The petitioner apprehended that the authorities would pass a composite adjudication order covering multiple financial years and sought direction for passing separate orders and granting opportunity for cross-examination.Court Decision:The Court held that at the stage of show cause notice there was no material to assume that the authorities would adopt a procedure contrary to law or deny opportunity of hearing. Therefore, interference with the show cause notice was not warranted.However, considering the limitation period for passing order for the financial year 2017-18, the Court permitted the authority to pass an order for that year within the prescribed limitation after granting opportunity of hearing. For the subsequent financial years, the Court observed that separate adjudication orders ought to be issued for each year even if the show cause notice is composite, and directed the authority to pass separate orders after granting reasonable opportunity of hearing. The writ petition was disposed of with these directions.Cases Referred by Court:· W.P.(C) No.35156 of 2024 (Kerala High Court)
Facts :The petitioner challenged assessment orders on the ground that notices and orders were only uploaded on the GST portal without being served through other modes under Section 169 of the Act. It was contended that due to reliance on tax practitioners and lack of awareness, the petitioner did not receive effective notice. The petitioners argued that Section 169 should be interpreted to ensure compliance with principles of natural justice. The Department contended that portal service is valid and sufficient compliance.Court Decision:The Court held that Section 169 must be interpreted to ensure effective service of notice and compliance with natural justice. It ruled that modes under Section 169(1)(a) to (c) are alternative primary modes and must ordinarily be attempted, and only upon failure or impracticability, modes under clauses (d) to (f), including portal upload, can be resorted to. Mere uploading on the portal without attempting other modes is insufficient. The impugned assessment orders were set aside and matters remanded for fresh adjudication after giving opportunity to file objections and be heard.Cases Referred:M. Satyanarayana v. State of KarnatakaSingaravelar Spinning Mills (P) Ltd. v. State of Tamil NaduPandidorai Sethupathi Raja v. Superintendent of Central TaxPee Bee Enterprises v. Assistant CommissionerRam Prasad Sharma v. Chief CommissionerV.N.V. Builders Pvt. Ltd. v. State Tax Officer
Sahulhameed v. The Commercial Tax Officer, Tuticorin-II 06-01-2025
Facts :The petitioner challenged assessment orders on the ground that notices and orders were only uploaded on the GST portal without being served through other modes under Section 169 of the Act. It was contended that due to reliance on tax practitioners and lack of awareness, the petitioner did not receive effective notice. The petitioners argued that Section 169 should be interpreted to ensure compliance with principles of natural justice. The Department contended that portal service is valid and sufficient compliance.Court Decision:The Court held that Section 169 must be interpreted to ensure effective service of notice and compliance with natural justice. It ruled that modes under Section 169(1)(a) to (c) are alternative primary modes and must ordinarily be attempted, and only upon failure or impracticability, modes under clauses (d) to (f), including portal upload, can be resorted to. Mere uploading on the portal without attempting other modes is insufficient. The impugned assessment orders were set aside and matters remanded for fresh adjudication after giving opportunity to file objections and be heard.Cases Referred:M. Satyanarayana v. State of KarnatakaSingaravelar Spinning Mills (P) Ltd. v. State of Tamil NaduPandidorai Sethupathi Raja v. Superintendent of Central TaxPee Bee Enterprises v. Assistant CommissionerRam Prasad Sharma v. Chief CommissionerV.N.V. Builders Pvt. Ltd. v. State Tax Officer
BackgroundGujarat Industrial Development Corporation (GIDC), a nodal agency of the Government of Gujarat, acquires and develops industrial estates and allots plots of land on long-term lease of 99 years to industrial entities, initially by a licensing agreement and subsequently by a registered lease deed, on payment of premium and periodic lease rent. The lease deed permits the lessee to assign leasehold rights to a third party with GIDC's approval. After implementation of GST, the department issued summons and show cause notices to members of the Gujarat Chamber of Commerce and Industry who had assigned their leasehold rights along with buildings constructed thereon on the GIDC plots to third party assignees for lump-sum consideration, demanding GST at 18% by treating such assignment as "supply of service" under the CGST/SGST Act, 2017. The petitioner Chamber made representations contending that such assignment is a transfer of immovable property excluded from GST under Entry 5 of Schedule III, and alternatively, that ITC would be admissible if GST is levied. Since representations were not considered, a batch of 60+ writ petitions were filed, with SCA No. 11345 of 2023 treated as the lead matter.Court Observations (Verbatim)"When such leasehold right is transferred by the lessee-assignor in favour of a third person-assignee by execution of deed of assignment, it would be nothing but transfer of an 'immovable property' in view of the settled legal position to the effect that lease for 99 years or for a long term in consideration of premium paid is as much an alienation as sale or mortgage.""Interest in the immovable property in form of leasehold rights cannot be said to be different than the immovable property itself.""Leasehold rights which are to be considered as sale of land would be out of purview of the provisions of scope of supply as per section 7 of the GST Act.""The scope of 'supply of services' would not include transfer of leasehold rights as supply of service as it would be transfer of 'immovable property' being a benefit arising out of immovable property consisting of land and building.""Clause 5 of Schedule III of the GST Act clearly provides that sale of land cannot be treated as supply of goods or services. Therefore, leasehold rights which are to be considered as sale of land would be out of purview of the provisions of scope of supply as per section 7 of the GST Act.""Under the Service Tax Act, even the development rights which are the benefits arising from land were not liable to tax. Leasehold right is in fact a greater right and interest in land than development rights and the principle under the service tax regime would therefore, continue even to apply under the GST regime as the object of introduction of GST is to subsume the existing taxes.""When the lessee/assignor transfers the land having leasehold rights and building to the assignee, same cannot be considered as supply of service as it would be a transfer of immovable property. Therefore...assignment of leasehold rights equal to the renting of immovable property as per clause 5(b) of the Schedule II would be contrary to such legislative intent.""When the legislature in its wisdom has chosen to exclude the sale of land and building from purview of GST Act, there is no ambiguity that section 7(1)(a) would be applicable to the sale of immovable property and once it is held that assignment of the leasehold rights being the benefit/interest arising out of immovable property would partake the character as such, cannot be covered under the scope of supply of services by any stretch of imagination.""Transfer charges paid by the assignee would be subject to levy of GST but at the same time consideration paid by the assignee to the lessee/assignor would amount to transfer of immovable property which would be out of purview of provision of section 7(1)(a) of the GST Act read with Schedule II and Schedule III thereof."Final VerdictAssignment/sale/transfer of leasehold rights of GIDC-allotted industrial plot along with building by lessee/assignor to third party/assignee for consideration is a transfer of immovable property covered under Clause 5 of Schedule III of the GST Act and not a "supply of service" — hence not liable to GST. All impugned show cause notices and orders/appeals were quashed and set aside. Rule made absolute. Stay of operation of the judgment was also rejected by the Court.
Gujarat Chamber of Commerce & Industry v. Union of India 03-01-2025
BackgroundGujarat Industrial Development Corporation (GIDC), a nodal agency of the Government of Gujarat, acquires and develops industrial estates and allots plots of land on long-term lease of 99 years to industrial entities, initially by a licensing agreement and subsequently by a registered lease deed, on payment of premium and periodic lease rent. The lease deed permits the lessee to assign leasehold rights to a third party with GIDC's approval. After implementation of GST, the department issued summons and show cause notices to members of the Gujarat Chamber of Commerce and Industry who had assigned their leasehold rights along with buildings constructed thereon on the GIDC plots to third party assignees for lump-sum consideration, demanding GST at 18% by treating such assignment as "supply of service" under the CGST/SGST Act, 2017. The petitioner Chamber made representations contending that such assignment is a transfer of immovable property excluded from GST under Entry 5 of Schedule III, and alternatively, that ITC would be admissible if GST is levied. Since representations were not considered, a batch of 60+ writ petitions were filed, with SCA No. 11345 of 2023 treated as the lead matter.Court Observations (Verbatim)"When such leasehold right is transferred by the lessee-assignor in favour of a third person-assignee by execution of deed of assignment, it would be nothing but transfer of an 'immovable property' in view of the settled legal position to the effect that lease for 99 years or for a long term in consideration of premium paid is as much an alienation as sale or mortgage.""Interest in the immovable property in form of leasehold rights cannot be said to be different than the immovable property itself.""Leasehold rights which are to be considered as sale of land would be out of purview of the provisions of scope of supply as per section 7 of the GST Act.""The scope of 'supply of services' would not include transfer of leasehold rights as supply of service as it would be transfer of 'immovable property' being a benefit arising out of immovable property consisting of land and building.""Clause 5 of Schedule III of the GST Act clearly provides that sale of land cannot be treated as supply of goods or services. Therefore, leasehold rights which are to be considered as sale of land would be out of purview of the provisions of scope of supply as per section 7 of the GST Act.""Under the Service Tax Act, even the development rights which are the benefits arising from land were not liable to tax. Leasehold right is in fact a greater right and interest in land than development rights and the principle under the service tax regime would therefore, continue even to apply under the GST regime as the object of introduction of GST is to subsume the existing taxes.""When the lessee/assignor transfers the land having leasehold rights and building to the assignee, same cannot be considered as supply of service as it would be a transfer of immovable property. Therefore...assignment of leasehold rights equal to the renting of immovable property as per clause 5(b) of the Schedule II would be contrary to such legislative intent.""When the legislature in its wisdom has chosen to exclude the sale of land and building from purview of GST Act, there is no ambiguity that section 7(1)(a) would be applicable to the sale of immovable property and once it is held that assignment of the leasehold rights being the benefit/interest arising out of immovable property would partake the character as such, cannot be covered under the scope of supply of services by any stretch of imagination.""Transfer charges paid by the assignee would be subject to levy of GST but at the same time consideration paid by the assignee to the lessee/assignor would amount to transfer of immovable property which would be out of purview of provision of section 7(1)(a) of the GST Act read with Schedule II and Schedule III thereof."Final VerdictAssignment/sale/transfer of leasehold rights of GIDC-allotted industrial plot along with building by lessee/assignor to third party/assignee for consideration is a transfer of immovable property covered under Clause 5 of Schedule III of the GST Act and not a "supply of service" — hence not liable to GST. All impugned show cause notices and orders/appeals were quashed and set aside. Rule made absolute. Stay of operation of the judgment was also rejected by the Court.
Background. The petitioner had acquired a wind electric generator park of twenty windmills by slump sale in 2015 and sold that business to Bilal Match Works under a sale of business agreement dated 14.06.2019 for a consideration of Rs. 9,50,00,000. Relying on the figure of Rs. 10,34,32,205 appearing in the petitioner’s sixth annual report for FY 2019-20, being cost of machinery plus profit on sale, the assessment order dated 26.11.2021 confirmed tax of Rs. 93,08,898 each under CGST and SGST together with penalty at one hundred per cent under Section 122(1).Observations of the Court. The Court pointed to the department’s own notice dated 21.10.2021, which had recorded that where a person ceases to be a taxable person, goods forming part of the assets of the business are deemed to be supplied immediately before he ceases to be a taxable person unless the business is transferred as a going concern to another person, in terms of entry 4(c)(i) of Schedule II, and which had categorically admitted, on the strength of the agreement filed, that the consideration of Rs. 9,50,00,000 was not exigible to tax, proposing to bring only the differential of Rs. 84,32,205 to tax.The impugned order having nonetheless confirmed the demand on the entire Rs. 10,34,32,205 taken from the annual report, the Court held the demand to be unsustainable, arbitrary and contrary to that notice.Final verdict. The writ petition was allowed, the impugned order was set aside and the matter was remitted to the respondent to pass a fresh order on merits and in accordance with law, after hearing the petitioner, within eight weeks from receipt of the order.
Frontline Wind Energy Private Limited v. The Assistant Commissioner (ST) 02-01-2025
Background. The petitioner had acquired a wind electric generator park of twenty windmills by slump sale in 2015 and sold that business to Bilal Match Works under a sale of business agreement dated 14.06.2019 for a consideration of Rs. 9,50,00,000. Relying on the figure of Rs. 10,34,32,205 appearing in the petitioner’s sixth annual report for FY 2019-20, being cost of machinery plus profit on sale, the assessment order dated 26.11.2021 confirmed tax of Rs. 93,08,898 each under CGST and SGST together with penalty at one hundred per cent under Section 122(1).Observations of the Court. The Court pointed to the department’s own notice dated 21.10.2021, which had recorded that where a person ceases to be a taxable person, goods forming part of the assets of the business are deemed to be supplied immediately before he ceases to be a taxable person unless the business is transferred as a going concern to another person, in terms of entry 4(c)(i) of Schedule II, and which had categorically admitted, on the strength of the agreement filed, that the consideration of Rs. 9,50,00,000 was not exigible to tax, proposing to bring only the differential of Rs. 84,32,205 to tax.The impugned order having nonetheless confirmed the demand on the entire Rs. 10,34,32,205 taken from the annual report, the Court held the demand to be unsustainable, arbitrary and contrary to that notice.Final verdict. The writ petition was allowed, the impugned order was set aside and the matter was remitted to the respondent to pass a fresh order on merits and in accordance with law, after hearing the petitioner, within eight weeks from receipt of the order.
Background. The petitioner’s electronic credit ledger was blocked by the State authorities on 20.03.2021 following scrutiny and an ASMT-10 notice, and was unblocked on 07.07.2021. In the meantime, to discharge its output liability for March 2021, the petitioner paid through the electronic cash ledger, and thereafter sought refund of the resulting accumulated credit of Rs. 78,20,202 in FORM GST RFD-01 under the residual category. The claim was rejected and the appeal dismissed on 14.03.2023. The petitioner had undertaken no business after March 2021 and continued to file nil returns while retaining registration for tender participation.Observations of the Court. The Court found that the dues for March 2021 had been discharged only through the cash ledger and not also through the blocked credit ledger, so there was no duplication or double payment for the tax period, and that the legality of the blocking and unblocking between 20.03.2021 and 07.07.2021 had never been the subject matter of any litigation in which it was determined.To claim refund of unutilised credit the petitioner had to fall within Section 54(3) read with Section 54(8), which permits refund only where credit accumulates on account of zero-rated supplies made without payment of tax, or where the rate of tax on inputs is higher than that on output supplies. Neither condition was satisfied. The accumulated credit remains available for future tax liability, and the refund had been sought under a misconception of law.Final verdict. No illegality was found in the impugned appellate order calling for interference in writ jurisdiction, and the petition was dismissed.
Sterlite Power Transmission Ltd. v. The Additional Commissioner (Appeals) 12-12-2024
Background. The petitioner’s electronic credit ledger was blocked by the State authorities on 20.03.2021 following scrutiny and an ASMT-10 notice, and was unblocked on 07.07.2021. In the meantime, to discharge its output liability for March 2021, the petitioner paid through the electronic cash ledger, and thereafter sought refund of the resulting accumulated credit of Rs. 78,20,202 in FORM GST RFD-01 under the residual category. The claim was rejected and the appeal dismissed on 14.03.2023. The petitioner had undertaken no business after March 2021 and continued to file nil returns while retaining registration for tender participation.Observations of the Court. The Court found that the dues for March 2021 had been discharged only through the cash ledger and not also through the blocked credit ledger, so there was no duplication or double payment for the tax period, and that the legality of the blocking and unblocking between 20.03.2021 and 07.07.2021 had never been the subject matter of any litigation in which it was determined.To claim refund of unutilised credit the petitioner had to fall within Section 54(3) read with Section 54(8), which permits refund only where credit accumulates on account of zero-rated supplies made without payment of tax, or where the rate of tax on inputs is higher than that on output supplies. Neither condition was satisfied. The accumulated credit remains available for future tax liability, and the refund had been sought under a misconception of law.Final verdict. No illegality was found in the impugned appellate order calling for interference in writ jurisdiction, and the petition was dismissed.
Facts:The petitioner challenged the assessment order dated 07.08.2024 for the years 2019-20 and 2022-23 and the rectification order dated 12.11.2024 passed by the State Tax Officer. The petitioner contended that the show cause notice was vague and that the limitation for filing appeal should not be computed from the date of the original assessment order since a rectification application under Section 161 had been filed and rejected later.Court Decision:The Court held that when a rectification application under Section 161 of the GST Act is filed, the rectification order merges with the original assessment order. If the rectification application is rejected, the limitation period for filing an appeal against the original assessment order cannot be computed from the date of the original order. The limitation would commence from the date on which the rectification application is disposed of.Since the rectification order was passed on 12.11.2024, the limitation for filing appeal against the assessment order dated 07.08.2024 would be reckoned from 12.11.2024. The writ petitions were disposed of granting liberty to the petitioner to file an appeal and clarifying that limitation shall be calculated from the date of rejection of the rectification application.Cases Referred by Court:· MD Electric Co. v. State Tax Officer, Chennai, (2024) 17 Centax 348 (Mad.)
Facts:The petitioner challenged the assessment order dated 07.08.2024 for the years 2019-20 and 2022-23 and the rectification order dated 12.11.2024 passed by the State Tax Officer. The petitioner contended that the show cause notice was vague and that the limitation for filing appeal should not be computed from the date of the original assessment order since a rectification application under Section 161 had been filed and rejected later.Court Decision:The Court held that when a rectification application under Section 161 of the GST Act is filed, the rectification order merges with the original assessment order. If the rectification application is rejected, the limitation period for filing an appeal against the original assessment order cannot be computed from the date of the original order. The limitation would commence from the date on which the rectification application is disposed of.Since the rectification order was passed on 12.11.2024, the limitation for filing appeal against the assessment order dated 07.08.2024 would be reckoned from 12.11.2024. The writ petitions were disposed of granting liberty to the petitioner to file an appeal and clarifying that limitation shall be calculated from the date of rejection of the rectification application.Cases Referred by Court:· MD Electric Co. v. State Tax Officer, Chennai, (2024) 17 Centax 348 (Mad.)
Background. Digilife Distribution and Marketing Services Ltd. amalgamated into HCL Infosystems under a scheme approved by the NCLT on 10.08.2022, with an appointed date of 01.04.2022. The amalgamating company applied for cancellation of its registration on 12.10.2022 and HCL filed FORM GST ITC-02 with a Chartered Accountant’s certificate on the same day. The department nevertheless issued a show cause notice dated 03.12.2023 under Section 73 and a final order dated 27.04.2024 in the name of the dissolved company.Observations of the Court. The Court applied the line of authority in Maruti Suzuki India Ltd. and Spice Entertainment, holding that Section 160 of the CGST Act — being pari materia with Section 292B of the Income-tax Act, 1961 — cannot come to the rescue of the respondents or salvage a notice and order issued to a non-existent entity.On Section 87, the Court held that the provision was placed on the statute book ex abundanti cautela, to preserve and identify transactions occurring between the amalgamating companies and to treat them as distinct companies for the period up to the date of the order approving the scheme, so that such transactions do not escape tax. It found itself unable to read Section 87 as enabling the respondents either to continue to place a non-existent entity on notice or to pass an assessment order against it. In terms of Section 87 itself, the liabilities of the non-existent company stand transposed onto the amalgamated entity, so the revenue is not deprived of its right to subject the transactions to tax.Final verdict. The writ petition was allowed. The show cause notice dated 03.12.2023 and the order dated 27.04.2024 were quashed, leaving it open to the respondents to draw such proceedings as may otherwise be permissible in law.
HCL Infosystems Ltd. v. Commissioner of State Tax & Anr. 21-11-2024
Background. Digilife Distribution and Marketing Services Ltd. amalgamated into HCL Infosystems under a scheme approved by the NCLT on 10.08.2022, with an appointed date of 01.04.2022. The amalgamating company applied for cancellation of its registration on 12.10.2022 and HCL filed FORM GST ITC-02 with a Chartered Accountant’s certificate on the same day. The department nevertheless issued a show cause notice dated 03.12.2023 under Section 73 and a final order dated 27.04.2024 in the name of the dissolved company.Observations of the Court. The Court applied the line of authority in Maruti Suzuki India Ltd. and Spice Entertainment, holding that Section 160 of the CGST Act — being pari materia with Section 292B of the Income-tax Act, 1961 — cannot come to the rescue of the respondents or salvage a notice and order issued to a non-existent entity.On Section 87, the Court held that the provision was placed on the statute book ex abundanti cautela, to preserve and identify transactions occurring between the amalgamating companies and to treat them as distinct companies for the period up to the date of the order approving the scheme, so that such transactions do not escape tax. It found itself unable to read Section 87 as enabling the respondents either to continue to place a non-existent entity on notice or to pass an assessment order against it. In terms of Section 87 itself, the liabilities of the non-existent company stand transposed onto the amalgamated entity, so the revenue is not deprived of its right to subject the transactions to tax.Final verdict. The writ petition was allowed. The show cause notice dated 03.12.2023 and the order dated 27.04.2024 were quashed, leaving it open to the respondents to draw such proceedings as may otherwise be permissible in law.
BackgroundAn Assessment Order dated 20th December 2023 was passed against the Petitioner under Section 73 of the TNGST Act 2017. Within the stipulated time, the Petitioner filed a Rectification Application under Section 161 seeking rectification of errors apparent on the face of the record in the Assessment Order. The first Respondent, without assigning any reasons as to why the Assessment Order did not suffer from any apparent error and without giving any opportunity of hearing, rejected the Rectification Application vide order dated 02nd February 2024. The Rectification Order merely extracted tables of figures indicating the amounts the petitioner was liable to pay — without any reasoning or analysis. The Petitioner challenged both the Assessment Order and the Rectification Order before the High Court under Article 226 of the Constitution.Relevant Facts & Rival ContentionsThe Petitioner contended that the Rectification Application was rejected without hearing and without assigning reasons as to how the Assessment Order was free from apparent errors — a clear violation of the third proviso to Section 161. The Revenue, however, vehemently argued a narrow construction — that no reasons need to be given when rejecting a rectification application, as the authority only needs to check for apparent error and can reject without reasons if none exists. More importantly, the Revenue contended that the hearing requirement under the third proviso to Section 161 arises ONLY when the Assessing Officer initiates rectification suo motu and the resulting order is detrimental to the assessee — and NOT when the rectification application had been made at the instance of the assessee himself. The Revenue further argued that the petitioner had not even indicated any apparent error in his application, and therefore no interference was warranted.Third Proviso to Section 161 — The Pivotal Statutory Text:"Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification."Revenue's ArgumentProviso applies only to suo motu rectification adverse to assessee — NOT to rejection of assessee-initiated applicationCourt's RulingProviso applies to BOTH situations — even rejection of assessee-initiated application requires hearing and reasons Court Observations (Verbatim)"A perusal of the order does not also indicate that there had been no error apparent on the record to reject the rectification. He had only extracted the tables indicating the figures which the petitioner is liable to pay. There is also no reasonings as to why there is no error apparent on the face of the record. For this reason, the impugned order dated 02.02.2024 is liable to be set aside."— Para 8 (on the mechanical nature of the Rectification Order)"Even though, streneous efforts had been made by the learned Additional Government Pleader that no personal hearing need to be given when an application had been made at the instance of the assesse, I am not in agreementd with the learned Additional Government Pleader. The Provisio indicates that when an order is being made adverse to the assessee, then he should be given an opportunity of being heard when the rectification adversely affects any person. The principles of natural justice had been inbuilt by way of the 3rd Proviso to Section 161."— Para 8 (rejecting Revenue's narrow construction of the third proviso)"If pursuant to a Rectification Application, if a rectification is made and if it adversely affects the assesse, Proviso 3 contemplates an opportunity of hearing to be given. However, when an Rectification Application is made at the instance of assessee and the rectification is being sought to be rejected without considering the reasons for rectification or by giving reasons as to why such rectification could not be entertained. It is also imperative that the assessee to be put on notice."— Para 8 (expanding the scope of natural justice under Section 161 — the core ratio)"I am inclined to hold that the order of rectification passed by the first respondent dated 02.02.2024 is contrary to the provisions of Section 161 and in that aspect, the same alone is set aside and the Rectification Application filed by the petitioner shall be taken afresh by the first respondent and after giving an opportunity to the petitioner, the first respondent shall pass appropriate orders and in accordance with law."— Para 9 (operative conclusion and direction)Final VerdictWrit Petition allowed. Rectification Order dated 02.02.2024 set aside as contrary to the provisions of Section 161 of the CGST/TNGST Act. Rectification Application to be taken afresh; first Respondent directed to grant opportunity of hearing to the Petitioner and then pass a reasoned order in accordance with law. All further remedies of the Petitioner preserved. No order as to costs.
Suriya Cement Agency vs State Tax Officer, 21-11-2024
BackgroundAn Assessment Order dated 20th December 2023 was passed against the Petitioner under Section 73 of the TNGST Act 2017. Within the stipulated time, the Petitioner filed a Rectification Application under Section 161 seeking rectification of errors apparent on the face of the record in the Assessment Order. The first Respondent, without assigning any reasons as to why the Assessment Order did not suffer from any apparent error and without giving any opportunity of hearing, rejected the Rectification Application vide order dated 02nd February 2024. The Rectification Order merely extracted tables of figures indicating the amounts the petitioner was liable to pay — without any reasoning or analysis. The Petitioner challenged both the Assessment Order and the Rectification Order before the High Court under Article 226 of the Constitution.Relevant Facts & Rival ContentionsThe Petitioner contended that the Rectification Application was rejected without hearing and without assigning reasons as to how the Assessment Order was free from apparent errors — a clear violation of the third proviso to Section 161. The Revenue, however, vehemently argued a narrow construction — that no reasons need to be given when rejecting a rectification application, as the authority only needs to check for apparent error and can reject without reasons if none exists. More importantly, the Revenue contended that the hearing requirement under the third proviso to Section 161 arises ONLY when the Assessing Officer initiates rectification suo motu and the resulting order is detrimental to the assessee — and NOT when the rectification application had been made at the instance of the assessee himself. The Revenue further argued that the petitioner had not even indicated any apparent error in his application, and therefore no interference was warranted.Third Proviso to Section 161 — The Pivotal Statutory Text:"Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification."Revenue's ArgumentProviso applies only to suo motu rectification adverse to assessee — NOT to rejection of assessee-initiated applicationCourt's RulingProviso applies to BOTH situations — even rejection of assessee-initiated application requires hearing and reasons Court Observations (Verbatim)"A perusal of the order does not also indicate that there had been no error apparent on the record to reject the rectification. He had only extracted the tables indicating the figures which the petitioner is liable to pay. There is also no reasonings as to why there is no error apparent on the face of the record. For this reason, the impugned order dated 02.02.2024 is liable to be set aside."— Para 8 (on the mechanical nature of the Rectification Order)"Even though, streneous efforts had been made by the learned Additional Government Pleader that no personal hearing need to be given when an application had been made at the instance of the assesse, I am not in agreementd with the learned Additional Government Pleader. The Provisio indicates that when an order is being made adverse to the assessee, then he should be given an opportunity of being heard when the rectification adversely affects any person. The principles of natural justice had been inbuilt by way of the 3rd Proviso to Section 161."— Para 8 (rejecting Revenue's narrow construction of the third proviso)"If pursuant to a Rectification Application, if a rectification is made and if it adversely affects the assesse, Proviso 3 contemplates an opportunity of hearing to be given. However, when an Rectification Application is made at the instance of assessee and the rectification is being sought to be rejected without considering the reasons for rectification or by giving reasons as to why such rectification could not be entertained. It is also imperative that the assessee to be put on notice."— Para 8 (expanding the scope of natural justice under Section 161 — the core ratio)"I am inclined to hold that the order of rectification passed by the first respondent dated 02.02.2024 is contrary to the provisions of Section 161 and in that aspect, the same alone is set aside and the Rectification Application filed by the petitioner shall be taken afresh by the first respondent and after giving an opportunity to the petitioner, the first respondent shall pass appropriate orders and in accordance with law."— Para 9 (operative conclusion and direction)Final VerdictWrit Petition allowed. Rectification Order dated 02.02.2024 set aside as contrary to the provisions of Section 161 of the CGST/TNGST Act. Rectification Application to be taken afresh; first Respondent directed to grant opportunity of hearing to the Petitioner and then pass a reasoned order in accordance with law. All further remedies of the Petitioner preserved. No order as to costs.
