Order released without giving notice is contrary to the principles of natural justice

The Hon'ble Madras High Court in the case Tvl. Spark Bio Gas (P.) Ltd v. State Tax Officer (FAC), Vellore [W.P. 19801/2024 dated July 31, 2024] held that an order released without giving proper notice is contrary to principles of natural justice.

Facts:

Tvl. Spark Bio Gas (P.) Ltd. ("the Petitioner") is a wholly owned subsidiary of M/s. Mahasakthi Bio Enercon Private Limited ("the Holding Company"). The holding company specialised in the production and bottling of bio-CNG and was awarded the concession by the Greater Chennai Corporation for the construction of six biogas plants. For fulfilment of the said purpose CEID Consultants and Engineering Private Limited ("the CEID") agreed to supply goods by procuring them from Power Hydrotech Private Limited ("the Power Hyderotech"). The transportation of the goods was to happen on "bill to ship" basic form Gujrat to Chennai with the petitioner named as consignee in the tax invoice.

The goods were intercepted by the authorities on the way from Gujrat to Chennai. The Notices that were issued in Form GST MOV-1 and MOV-2 mentioned only CIED and Power Hydrotech. Despite this the order ("the Impugned Order") dated May 27, 2024 imposed penalties on the petitioner under section 129 of applicable GST statutes.

The petitioner contended that the impugned order was against the principles of natural justice as the petitioner was never given a chance to defend.

Issue:

Whether the issuing order without giving a chance to defend contrary to principles of Natural Justice?

Held:

The Hon'ble Madras High Court in W.P 19801/2024 held as under:

· Observed that the petitioners were not served notice and were also not part of the proceeding and issuing an order against them was a violation of principles of natural justice.

· Held that the impinged order was in contradiction of principles of natural justice.

· Observed that, under Section 129(1)(c) of the applicable GST enactments the goods can be released upon furnishing proper bank guarantee or other security.

· Directed that, the goods to be realised upon the petitioner providing satisfactory security.

· Directed, the authorities to initiate new proceedings against the petitioner in accordance with the law.

Our Comments:

Section 129 of the Central Goods and Servies Act "Detention, seizure and release of goods and conveyances in transit" serves primarily the compliance of GST laws in I transportation of goods. It says:

• The goods with suspicion of tax evasion can be detained.
• The goods can be released upon payment of due taxes and penalties.
• If the goods are not released within 7 days action is to be taken under Section 130.
• Proper notice tie be given to reply before issuing an order of penalty.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED