Summary:
Alkem Laboratories is the sixth-largest pharmaceutical company in India. The plaintiff (Alkem Laboratories) filed a civil case against the Government for not giving an opportunity of hearing after issuing of the show-cause notices.
Preface:
• Alkem Laboratories sold the premises to the Third Party on 24th December 2019. The sale of property is not considered under the GST Act. The sale of land is not taxable under the pre as well as post-GST era.
• However, a notice was issued to the applicant for “leasing” the property to the third party. As per the CGST and SGST Act, leasing/ sub-leasing of the property is considered as supply of service. The respondent levied 9% CGST and 9% SGST on Alkem as per the real estate services tax liability. The scope falls under Entry- 5 of Schedule III as per Section 7 of the Central Goods and Service Tax Act, 2017. (CGST Act)
• The respondent also issued show cause notices to the applicant viz. Annexure A, B, C and D Colly in the months of January, March, June, and July respectively.
• The plaintiff party asked for a hearing as a response to the second notice i.e., Annexure B, which was not granted. The cause of not granting a hearing is still not clear in the picture.
• The respondent party also begun the tax recovery from the respondent within a month of releasing notice- Annexure D; which is not permissible as recovery shall begin after three months of service of order.
Sections applicable:
• Section 75(4) of CGST Act makes it abundantly clear that opportunity of hearing ought to be given, more particularly, in cases where request received in writing from person chargeable with tax or penalty and without any adverse decision contemplated against such person.
• Section 75 (5) states that 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.
• Article 226 of constitution also states that no opportunity of personal hearing given to writ applicant by concerned authority before passing impugned order (order in question) although specific request thereto, made- impugned order quashed and set aside.
• Section 78 of GST Act, 2017, indicated that no recovery proceedings can be initiated against assessee before expiry of three months from date of service.
Proceedings:
• The plaintiff asked for Writ of Certiorari (to review the order or take back the order) in the High Court under Article 226 of Constitution, to quash the order- Annexure A issued by the respondent.
• The Writ of Certiorari was also asked for the direct re-adjudication of Annexure B after following the principles of natural justice. The principles of natural justice allow the applicant for an appeal of hearing, in response to the show-cause notice.
• The Writ of Mandamus (restraining the public officer from enforcing the order) was filed to not recover the amount imposed and stay the execution and other proceedings.
• The sub-section 5 of Section 75 under the Gujarat Goods and Service Tax i.e., SGST Act, allows the petitioner to adjourn the proceedings after showing the sufficient cause to the respondent authorities. But since there was no sufficient cause shown, the petitioner does not get the assistance under this section.
• The respondent authority claims that several opportunities were provided to the writ applicant by issuing notices, which were not duly responded, although the applicant responded to Annexure A and B notices in the months of February and March respectively. Hence, the respondent issued the order of recovery on 21st October, 2020.
Verdict:
• The court was of the view that under the principles of natural justice, the applicant was not given the opportunity of hearing.
• The notice i.e., Annexure A and the impugned order of recovery on 21st October 2020 was quashed and set aside. The consecutive orders were also quashed and set aside.
• The respondent shall, thereafter, proceed to pass the final order in accordance with the law.
• The application was disposed of.