The Gujarat High Court in its recent ruling in the case of Alkem Laboratories Ltd. v. Union of India has quashed and set aside the order imposing liability of GST along with interest & penalty and order in Form GST DRC-16 by the Assistant Commissioner for attachment of factory premises on the ground that no opportunity of personal hearing was given. It was held by the Court that one opportunity should be given to the writ applicant to appear before the Department and make good his case.
Facts of the Case:
This writ application filed by the applicant Alkem Laboratories Ltd. seeks to challenge the validity of the recovery notice issued by the Assistant Commissioner of State Tax (Enforcement) (Respondent) and order passed in Form GST DRC-16 dated 17-12-2020, inter alia, attaching the factory premise of the Applicant under Section 79 of the CGST Act,2017.
The order of attachment dated 17-12-2020, appeared to be the consequences of the order dated 21-10-2020 (Impugned order) uploaded on the GST Portal, by which, the liability of the Applicant to pay an amount towards GST along with interest and penalty whereas no opportunity of personal hearing was given to the Applicant by the concerned authority before passing the Impugned order.
Order of the Gujarat High Court: Deliberation and Ruling
- A perusal of the provisions of Section 78 of the CGST Act, would indicate that no recovery proceedings can be initiated against the assessee before the expiry of three months from the date of the service of the order. It is not in dispute that in the case on hand, within one month, the proceedings came to be initiated in the form of attachment of the factory premises.
- Having regard to the materials on record, one thing is for sure that no opportunity of personal hearing was given to the writ applicant by the concerned authority before passing the
impugned order. Although a specific request in this regard was made, yet, the impugned order came to be passed without affording any opportunity of hearing.
- Section 75(4), makes it abundantly clear that an opportunity of hearing has to be given, more particularly, in those cases where a request is received in writing from the person chargeable with tax or penalty and without any adverse decision is contemplated against such person.
In view of above, deliberations, the Gujarat High Court was of the view that they should give one opportunity to the writ applicant to appear before the Deptt. and make good his case. Accordingly, the Court quashed and set aside the, Impugned order and the order of attachment dated 17-12-2020 and remitted the matter to the Respondent for fresh consideration. Further, directed Respondent to issue a notice to the Applicant, for fixing a particular date for hearing and submission, and thereafter, proceed to pass the final order in accordance with law.
Relevant provisions of CGST Act:
For ready reference of our readers the relevant provisions of the CGST Act, 2017, involved in the above Ruling and reproduced below:
Section 75(4) of the CGST Act:
“General provisions relating to determination of tax”-
(4) 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”
Section 78 of the CGST Act:
“ Initiation of recovery proceedings-
Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated;
Provided that where the proper officer considers it expedient I the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him.”
Section 79(1)(d) of the CGST Act:
“Recovery of tax”.
(1) Where any amount payable by a person to the Government under any of the provisions of this Act or the rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely:––
(d) the proper officer may, in accordance with the rules to be made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person;”
Also Read: FAQs on quarterly filing of GSTR-3B and monthly payment of tax (QRMP Scheme)
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CA. Mohammad Salim is an ICAI award winning Chartered Accountant having rich experience of more than 20 years in the field of indirect taxes. He is the Member, Indirect Taxes Committee of PHD Chamber of Commerce and Industry. He is author of four successful books on GST published by Taxmann Publication and is also GST expert on taxmann portal.
