the essay of 20 July 2022 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">JULY 20, 2022</font></strong></font></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Unnatural Injustice? </strong></font></p> <p align="center"><u><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Vijay Kumar </strong></font></u></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</STRONG> National Anti-Profiteering Authority passed an order on November 16, 2018 - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTQzMDM4" target="_blank"><strong>2018-TIOL-13-NAA-GST</strong></a>. This was an order passed by a four-member bench but was actually heard by three Members.The Bombay High Court in its order - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTUzNDUx" target="_blank"><strong>2019-TIOL-2419-HC-MUM-GST </strong></a><strong> </strong>dated 01 10 2019 observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>We conclude that when the three members of the Authority had heard the Petitioner and participated in the entire hearing, the collectively signed decision, when the fourth member joined only for signing the order has resulted in violation of the principles of natural justice and fairness, and is liable to be set aside.</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The four members were Commissioner rank officers of GST.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTY1NjYy" target="_blank"><strong>2021-TIOL-179-SC-GST</strong></a><strong>, </strong> the Supreme Court held, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The Commissioner's understanding that an opportunity of being heard was at the discretion of the Commissioner is therefore flawed and contrary to the provisions of Rule 159(5). There has, hence, been a fundamental breach of the principles of natural justice. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTcyMTkz" target="_blank"><strong>2022-TIOL-961-HC-KOL-GST</strong></a>, the Calcutta High Court observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the department should ensure that an opportunity granted to the assessee is not reduced to mere formality and the opportunity should be an effective opportunity so that the principles of fairness is complied with.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">we are satisfied that the principles of natural justice had been violated even at the stage of commencement of the proceeding.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTcyMDE5" target="_blank"><strong>2022-TIOL-918-HC-AHM-GST</strong></a>, the Gujarat High Court observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, the respondent Authority has proceeded to pass the order for cancellation of registration on new material or facts which were neither formed part of the show cause notice nor the same were disclosed to the writ applicant. The aforesaid action of the respondent authority is in breach of violation of principles of natural justice. The writ applicant has been deprived of the reasonable opportunity without putting to their notice about such allegations, more particularly when the cancellation of registration under the GGST Act results into civil and criminal action. Thus, we find that the respondent authority has failed to adhere to the basic principles of natural justice and such action of the respondent authority is illegal and is required to be interfered with. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In an interesting case before the Madras High Court recently <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTcyMjUy" target="_blank"><strong>2022-TIOL-987-HC-MAD-GST</strong></a>, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the petitioner had made an application seeking registration in accordance with Section 22 r/w Section 25 of the CGST Act and Rule 8 of the CGST Rules. The registration sought was in respect of a rice mandi, the receipt of the application is duly acknowledged and physical verification (pv) was also duly undertaken. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thereafter, a notice come to be issued by the Superintendent, GST seeking a clarification with respect to the application for registration. The clarification sought was that the application did not enclose the details of <em>principal place of business </em> of the petitioner. The application in which the additional information has sought is as follows: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Principal Place of Business - Address - Others (Please specify) - P.V. officer reported that PV is verified and found in order (except proof of PPOB not uploaded) please clarify. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The petitioner duly responded uploading a copy of the rental / lease deed duly registered in the office of the Sub-Registrar, Krishnagiri as proof of principal place of business. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The impugned order has, however, come to be passed rejecting the application by way of a monosyllabic order dated 13.05.2022 simply - <strong>rejected </strong>- without assigning any reasons or explanation for rejection thereof. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court observed that an order of this nature is indefensive insofar as it is non-speaking, arbitrary and evidently has not taken into account the explanation furnished by the petitioner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Learned Counsel for the department referred to Rule 9(4), particularly the deployment of the word “ <strong>may </strong>” herein, that according to him, grants discretion to the authority to assign reasons.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 9(4) of the Central Goods and Services Tax Rules, 2017 is extracted below: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Verification of the application and approval </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">.............. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he <strong>may</strong>, for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG~05. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court noted that it was evident, that the word '<strong>may </strong>' only refers to the discretion to reject and not to <strong>blatantly violate </strong>the principles of natural justice. If the assessing authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court set aside the impugned order and directed that the petitioner be heard on the objection raised and orders be passed on the application for registration dated 13.05.2022 within a period of four weeks. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Somebody wants to do business and pay tax and for that he is required to be registered with the department. The officers of the department should, if they have a little commercial or national interest should welcome such a person, for he is a prospective taxpayer and a possible victim. When a goose walks into your office and tells you that it wants to lay a golden egg every day for you, do you ask it to go and bring its Aadhaar card? Or better still, threaten it with dire consequences!</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here, the petitioner had filed proof of his principal place of business. The Physical Verification Officer verified the premises and found it in order. Yet his application was rejected without any reason being revealed. What did the department achieve? Why do senior experienced educated officers refuse to follow primary principles of natural justice? Does it add to the stature of the department that even prospective taxpayers have to approach High Courts with the complaint that adjudication orders are passed without following the principles of natural justice? Is it contempt for the taxpayer who pays your salary? Is it contempt for the law? Or is it just convenience?</font></p> <p align="justify"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Next week</font></strong></p> </body> </html>