Jharkhand HC: Tax Authorities Must Follow Due Process; Penalized for Violating Natural Justice

The state tax authorities have been asked by the Jharkhand High Court to follow due procedure while passing adjudication orders.

The Division Bench of Chief Justice Ramachandra Rao and Justice Deepak Roshan remarked that “despite directions issued by the Court, it appears that State Tax authorities are continuing to conduct adjudication proceedings in utter disregard to the mandatory provisions of the Act and in violation of the principles of natural justice.”

In the same case, a show cause notice was issued before the assessee/petitioner dated 04.04.2024 fixing the date of compliance on 03.05.2024, but, on 03.05.2024, no proceedings were held and the first proceeding was held on 05.06.2024 and, on the said date itself an ex-parte order of adjudication was passed.

The order passed u/s 74 of the Jharkhand Goods and Services Tax Act, 2017 without granting any chance of personal hearing to the taxpayer, has been contested by the taxpayer.

The taxpayer, the order sheets, along with the adjudication orders, shall determine that adjudication orders were passed in flagrant breach of the principles of natural justice, as on the first date fixed under the show cause notice itself, adjudication orders were passed.

The department, before the SCN issuance, an inspection was made on the premises of the taxpayer, a spot summons was issued to the taxpayer and even DRC-01A were issued which shows that there was enough compliance with the principles of natural justice.

The bench, post-hearing both sides, remarked that the proceedings have been performed in utter violation of the principle of natural justice including the obligatory provisions as included under Sections 75(4) and 75(5) of the JGST Act, 2017.

The bench mentioned that “due to procedure being not followed by State Tax authorities in conduct of adjudication proceedings, huge revenue of the State is otherwise lost which could have been protected, if due procedure is followed while passing adjudication orders.”

It was noted by the bench that in the case of M/s. Godavari Commodities Limited v. The State of Jharkhand & Ors. [W.P.(T) No. 3908 of 2020], the Court has issued directions in the year 2022 itself directing the Commissioner of State Tax Department to issue proper guidelines/circular/notification elaborating therein the method which is to be adopted by State Tax authorities concerning the case of issuance of show cause notice, adjudication and recovery proceedings, so that proper procedure is followed by State Tax authorities in the conduct of the adjudication proceedings.

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The above-said directions have not been followed, the bench discovered.

For the above, the bench permitted the petition and asked the department to file a Cost of Rs 1,00,000 for each writ petition to the taxpayer for passing the order.