Jharkhand High Court Condemns ‘Blatant Disregard of Law,’ Quashes GST Adjudication Orders Passed Without Hearing
Kiran Raj
The High Court of Jharkhand quashed adjudication orders issued under the Jharkhand Goods and Services Tax Act, 2017 (JGST Act), citing violations of the principles of natural justice. The court found that the orders were passed without granting the petitioner an opportunity of personal hearing, rendering them legally unsustainable. The court directed the state tax authorities to refund the imposed costs to the petitioner within six weeks, while allowing them the liberty to initiate fresh proceedings in accordance with law.
The petitioner, Limra Traders, is a proprietorship firm engaged in trading lubricants, bearing scraps, and various iron materials. It is duly registered under the Goods and Services Tax (GST) framework and has regularly conducted transactions through proper banking channels. The petitioner challenged the adjudication orders that sought to recover Input Tax Credit (ITC) availed on purchases made from registered dealers. The tax authorities alleged that these dealers were non-existent, leading to the blockage and eventual denial of ITC.
In W.P.(T) No. 6027 of 2024, the petitioner had purchased goods in the financial year 2023-24 from M/s. A.S. Enterprises and paid GST amounting to Rs. 33,24,615. The transactions were supported by tax invoices, e-way bills, and lorry receipts, all recorded through proper banking channels. However, the tax authorities subsequently blocked the ITC under Rule 86A(1)(a)(i) of the Jharkhand Goods and Services Tax Rules, 2017, citing that M/s. A.S. Enterprises was found to be a non-existent entity.
A show cause notice (SCN) dated June 5, 2024, was issued to the petitioner, requiring a response by July 4, 2024. However, on July 5, 2024, an ex parte adjudication order was passed without granting the petitioner a personal hearing. The order imposed a demand for tax, interest, and penalty, holding the petitioner liable for the allegedly wrongful ITC claim.
Similarly, in W.P.(T) No. 6028 of 2024, the petitioner availed ITC of Rs. 7,35,097.20 for purchases from M/s. Vansh Enterprises in the financial year 2023-24. The petitioner contended that the payments were made through banking transactions, and all supporting documents, including tax invoices, e-way bills, and lorry receipts, were available. However, the tax authorities blocked the ITC under the same Rule 86A(1)(a)(i), asserting that M/s. Vansh Enterprises was a non-existent firm.
A show cause notice dated April 4, 2024, was issued, directing compliance by May 3, 2024. No proceedings took place on the compliance date. Instead, on June 5, 2024, an ex parte adjudication order was issued, imposing tax liability, interest, and penalties without a hearing.
The petitioner contended that both adjudication orders were passed in clear violation of Sections 75(4) and 75(5) of the JGST Act, 2017, which mandate the granting of an opportunity for a personal hearing before an adverse decision can be made.
The High Court examined the adjudication process and concluded that the orders were issued in violation of procedural fairness and natural justice. The court particularly noted that the adjudicating authority failed to provide the petitioner with an opportunity to be heard before passing orders imposing substantial financial liability.
The court referred to Section 75(4) of the JGST Act, which provides:
“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.”
Further, Section 75(5) of the JGST Act states:
“The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing. Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.”
The court observed that in W.P.(T) No. 6027 of 2024, the show cause notice issued on June 5, 2024, fixed the compliance date as July 4, 2024. However, the adjudication order was passed on July 5, 2024, without any recorded hearing. Similarly, in W.P.(T) No. 6028 of 2024, although the show cause notice dated April 4, 2024, required compliance by May 3, 2024, no proceedings occurred on that date. Instead, the adjudicating authority passed the final order ex parte on June 5, 2024.
The High Court relied on its previous judgement in M/s. Godavari Commodities Limited v. State of Jharkhand & Ors. [W.P.(T) No. 3908 of 2020], where it had stated that any adjudication order issued without affording a taxpayer an opportunity of hearing is unsustainable in law. The court noted:
“The original records produced before us leave no iota of doubt that the present adjudication proceedings have been carried out by the authorities of the State Tax Department in stark disregard to the mandatory provisions of the GST Act, and the well-known procedures for conduct of proceedings have been completely disregarded.”
The court took notice of the fact that numerous similar writ petitions are being filed before it, challenging adjudication orders passed without hearings. It also expressed concern over the lack of compliance with its previous directions in the Godavari Commodities case, where it had instructed the Commissioner of State Tax Department to issue clear procedural guidelines for conducting adjudication proceedings.
The High Court found the adjudicating authority’s actions to be in blatant disregard of statutory provisions and the principles of natural justice. Consequently, it quashed the impugned adjudication orders dated June 5, 2024, and July 10, 2024.
The court further imposed costs of Rs. 1,00,000 per petition, totalling Rs. 2,00,000, to be paid to the petitioner within six weeks from the date of receipt of the judgment. The respondents are free to initiate fresh proceedings in accordance with the law. Consequently, both writ petitions are allowed, and any pending interlocutory applications are disposed of.
Case Title: LIMRA Traders v. State of Jharkhand & Ors.
Case Numbers: W.P.(T) No. 6027 of 2024 & W.P.(T) No. 6028 of 2024
Bench: Chief Justice M.S. Ramachandra Rao, Justice Deepak Roshan
[Read/Download order]
