No demand order to be passed under Section 73 without giving opportunity of being heard: AP HC

Case details: Ocean Sparkle Ltd V. Assistant Commissioner (ST) - [2021] 129 taxmann.com 186 (Andhra Pradesh)

Judiciary and Counsel Details

• • A.V. Sesha Sai and Ms J. Umadevi, JJ.
  • Karan Talwar, learned counsel for the Petitioner. 
  • J. Naga Bhushan, learned Addl. Adv. for the Respondent.

Facts of the Case

The department issued a revised show cause notice (‘SCN’) under Section 73 on January 20, 2021 to the assessee for the period July 2017 to March 2018. Against this SCN, the assessee failed to file its objections within the time limit and thus department passed its assessment order on March 17, 2021. The assessee its objection to the department of March 18, 2021 (i.e. immediate next day of passing the assessment order).

The assessee challenged the given order before the Hon’ble Andhra Pradesh High Court on the ground that the order was passed by the department without giving the opportunity of being heard. It was argued by the assessee that passing the assessment order without giving reasonable opportunity of being heard is a violation of Section 75(4) which reads as under:

‘An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.’

The revenue has argued that it has passed order only after affording full-fledge opportunity to the assessee. It was also argued that in view of the alternative appellate remedy available under the GST law WRIT petition cannot be filed before the High Court.

The petitioner argued that it couldn’t file objections to the SCN within the stipulated time due to certain reasons (these reasons are not given in the final order passed by the Hon’ble High Court). However, the Court did not go in to it. The High Court noted that the impugned SCN proposes an adverse action against the assessee and the assessment order also confirms the demand on the ground that assessee failed to responds to the SCN by way of fling objections.

High Court held

The High Court held that when such a course of action is adopted by the Department which is prejudicial to the interest of assessee, the mandatory requirement of law as provided under Section 75(4) (Supra) is required to be followed. The High Court set aside the impugned order and remanded it to the department for fresh adjudication after taking the petitioner submissions.