The importance of adhering to principles of natural justice in tax assessment proceedings.

ORDER :

C.PRAVEEN KUMAR, J.

Since both the matters are inter-connected, the same are disposed of by this common order by taking W.P.No.5999 of 2021 as a lead petition.

2. W.P.No.5999 of 2021 is filed under Article 226 of the Constitution of India, seeking the following relief:

“….pleased to issue a Writ of Certiorari or any other appropriate writ or order or direction quashing the impugned order of the 1st Respondent dated 21.1.2021 in AO No.ZH3701210D45148 for the tax period 01.07.2017 to 15.02.2020 under the Central Goods and Services Tax Act 2017 and State Goods and Services Tax Act 2017 as illegal arbitrary and in violation of principles of natural justice and consequently direct the Ist Respondent to do the assessment de novo by granting an opportunity to the Petitioner to submit objections, after furnishing to the Petitioner all the material, which is available with the 1th Respondent for use against the Petitioner in the proceedings and also granting an opportunity of personal hearing and pass…”

3. While W.P.No.1832 of 2022 is filed by the same party seeking the following relief:

“…..to issue an appropriate writ order or direction more particularly a writ in the nature of WRIT OF MANDAMUS, declaring the action of the 5th Respondent in issuing impugned notice under section 79(1)(d) of CGS/APGST Act 2017 proposing to conduct Auction of the Petitioner’s premises, Door No 16-7-14, a residential house with 58.66 sq yrds on 10.01.2022 to recover Rs 37,34,52,454/ under CGST and SGST as illegal, arbitrary, unjustified and set aside the same, consequentially direct the 6th respondent to conduct investigation with the assistance of 3 to 5 Respondents into the allegations made in Demand Notice No.RC No: JA 3/42/2020 dated 21.01.2021 with the Petitioner?s cooperation and to pass such..…”

4. On 09.07.2020, the 1st respondent issued a show cause notice proposing to assess Sri Konathala Lakshmana Chakravarthy under Andhra Pradesh Goods and Service Tax Act, 2017 (for short ‘the Act’) for the period from 01.07.2017 to 15.02.2020 on the following turnovers construing that the entire business was done by the petitioner.

1. Purchase value of iron & steel scrap Liable to be taxed on reverse charge Rs.165,97,88,686 @ 18% Rs.29,87,61,963

2. Supply of iron & steel scrap Rs.207,47,35,858 @ 18% Rs.37,34,52,454

Sri Konathala Lakshmana Chakravarthy is hereby requested to file his objections, if any within (15) days from the date of receipt of this notice, adducing necessary documentary evidence in support of his claim and can also avail personal hearing to advance his arguments, failing which it will be construed that he is not having any objections to file and further action will be initiated without further notice”

5. Pursuant to the said show cause notice, the petitioner herein submitted his explanation, which lead to passing of the order on 21.01.2021 impugned herein.

6. Sri S.Dwarakanath Reddy, learned Senior Counsel appearing for the petitioner mainly submits that the impugned proceedings came to be issued without furnishing the material relied upon by the authority concerned while directing the petitioner to pay tax of Rs.37,34,52,454/-. In other words, the learned counsel would contend that even as per Section 75(7) of the Act, the petitioner should be given material relied upon by the authority, while passing an order against him. As the order came to be passed without furnishing the material relied upon, the same would be in violation of principles of natural justice.

7. Sri T.C.D.Sekhar, learned Government Pleader for Commercial Tax, strenuously opposed the same contending that the petitioner has committed fraud and claimed input tax credit without movement of the vehicle through the check post. He further submits that since the material collected and relied upon by the authority was from the Toll Plaza, no prejudice is caused to the petitioner since the very same material could have been collected by the petitioner as well as from the Toll Plaza