Ocean Sparkle Ltd vs. Assistant Commissioner: A Legal Battle in Andhra Pradesh High Court

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 Petitioner: Ocean Sparkle Ltd

Respondent: Assistant Commissioner (ST)

Court: In the High Court of Andhra Pradesh

Facts of the Case:

The case challenges an assessment order issued by the first respondent, confirming a tax demand, penalty, and interest totaling Rs. 57,43,679 for the period from July 2017 to March 2018. The order was based on a revised show cause notice issued under Section 73 of the CGST Act, 2017.

Grounds of Appeal:

The petitioner’s argument centers around the non-compliance with mandatory provisions outlined in Section 75(4) of the CGST Act, 2017. The Petitioner filed the Writ stating that the assessment order should be set aside because it was passed without giving them the required opportunity to present their case.

Section 75(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.

From the above legal provision, it is clear that an opportunity for a hearing must be provided when a written request is received from the individual liable for tax or penalty, or when there’s contemplation of an adverse decision against that individual. This provision also underscores that when an unfavorable decision is being considered for any taxpayer, ensuring their right to a fair hearing is essential and must be strictly adhered to.

Points Raised by Respondent:

The respondents, represented by the Additional Advocate General-II, argue that the petitioner failed to respond to the show cause notice in time and, therefore, cannot contest the assessment order. They also contend that the order was made after providing a full opportunity for the petitioner to present their case. Additionally, they assert that since there’s an alternative remedy of appeal available under Section 107 of the CGST Act 2017, the writ petition is not maintainable.

High Court Judgment and Reasons:

The court acknowledges that the petitioner couldn’t file objections within the stipulated time due to certain reasons. It also notes that while the reasons are not specified in the final order, they won’t delve into them considering the context.

The court reviews the relevant sections of the CGST Act 2017 related to the determination of tax, recovery, and general provisions. It emphasizes the importance of the opportunity of hearing as outlined in Section 75(4) of the Act when adverse decisions are contemplated against an assessee.

In the present case, the court finds that the impugned order, confirming a demand, was based on the petitioner’s failure to respond to the show-cause notice. Since this decision affects the petitioner’s interests, the court rules that the mandatory provisions of Section 75(4) must be followed. Thus, the impugned order violates principles of natural justice and is set aside.

The court rejects the argument about an alternative remedy of appeal and allows the writ petition. The assessment order is quashed, and the matter is remanded to the first respondent for reconsideration. The court directs that the petitioner’s objections, filed on 18-3-2021, should be taken into consideration during the assessment process, and a fresh hearing with the petitioner should be scheduled.

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CMA Mallikarjuna Gupta Director - Indirect Taxes
CMA Bhogavalli Mallikarjuna Gupta is a qualified CMA with over two decades of experience in the areas of Tax Advisory, Litigation, ERP Development & Implementation. He is also regular faculty at NACIN, RTI, ICAI and various other colleges.

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