IMPORTANT POINT
The court established that denying a party the right to cross-examine witnesses whose statements are relied upon in a penalty order violates principles of natural justice, rendering the order null.

JUDGMENT :

(Bechu Kurian Thomas, J.)

Petitioner is a registered taxpayer under the laws relating to Goods and Services Tax. He challenges an order imposing a penalty of more than Rs.9.40 Crores, under section 74(9) of the Central Goods & Services Tax Act, 2017 (for short 'CGST Act') apart from a further amount of Rs.9.40 Crores under section 122(1) of the State Goods & Services Tax Act, 2017 (for short ‘SGST Act’) and consequential interest and other penalties. Though an appeal is available to the petitioner under section 107 of the CGST/SGST Act, the jurisdiction under Article 226 of the Constitution of India has been invoked, alleging that the principles of natural justice have been violated while issuing the impugned order.

2. Petitioner is the proprietor of a plywood business by name 'M/s.Wood Tunes Enterprises'. As per Ext.P1 show cause notice, petitioner was called upon to explain why the penalty proposed therein ought not to be imposed for alleged willful misstatements and suppression of facts with intent to evade payment of GST. It was stated therein that the statements of 20 different persons were taken, indicating that the petitioner had indulged in fake registrations and suppression of sales for the purpose of deriving undue benefit from the input tax credit.

3. In the reply submitted on 16.01.2024, apart from denying all the allegations, petitioner specifically requested for an opportunity for cross-examination of those persons from whom the statements were allegedly obtained and also stated that those statements were all retracted and were even obtained by coercion. In the meantime, on 31.01.2024 petitioner was heard and later, by a communication dated 07.02.2024 petitioner’s request for cross-examination was refused. Immediately, petitioner filed Ext.P5 additional reply producing three affidavits of retractions filed by persons who had allegedly given statements and requested to withdraw the proceedings initiated and again requested to provide an opportunity for cross-examination. Disregarding the request for cross-examination, the first respondent proceeded to pass the final order dated 29-05-2024 produced as Ext.P8, imposing a huge liability on the petitioner. Petitioner challenges the said order.

4. A counter affidavit has been filed by respondents 1 to 4 stating that petitioner had indulged in a fraudulent activity by utilising the Aadhar Card details and PAN Card details of other persons who are referred to as ‘goalies’ in local trade parlance. It is alleged that petitioner had misused the invoices and e-way bills to facilitate clandestine supply of plywood in the name of goalies who were mere name lenders in the transaction and that those persons were serviced by other goalies, thereby creating a carousel of input tax credits across several States. Subsequent to the information, the Directorate General of GST Intelligence searched the office and residential premises of the petitioner and gathered documentary evidence and statements of his accomplices from which the adjudicating authority came to the conclusion that the petitioner had indulged in serious fraud. The respondents also stated that even though show-cause notices were issued in 2022, till 31.01.2024, there was no reply notice and when a personal hearing was granted on 31.01.2024, a reply notice was filed, requesting for cross-examination of the individuals who were named in the reply notice. After referring to various details it is stated that the request for cross-examination was only for the purpose of protracting the proceedings and there was no purpose in the said demand.

5. I have heard Sri. Jaikumar S. learned counsel for the petitioner and Sri. R. Harishankar, learned Standing Counsel for the respondents.

6. The only issue that requires consideration is whether the impugned order ought to be interfered with under Article 226 of the Constitution of India when the remedy of an appeal is available under section 107 of the Act.

7. On a reading of