Kerala High Court
The Nattakom Service Co-Opertive ... vs The Assistant Commissioner Of ... on 22 March, 2022
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
TUESDAY, THE 22ND DAY OF MARCH 2022 / 1ST CHAITHRA, 1944
WP(C) NO. 1188 OF 2022
PETITIONER:
THE NATTAKAM SERVICE CO-OPERTIVE BANK
LTIMITED,NO.3839
NATTAKOM, PAKKIL P.O.,
KOTTAYAM DISTRICT, PIN - 686 012,
REPRESENTED BY ITS SECRETARY SHEEBA P.
BY ADVS.
SRI.C.A.JOJO
SMT.SWATHY S.
RESPONDENTS:
1 THE ASSISTANT COMMISSIONER OF CENTRAL TAX AND
CENTRAL EXCISE, KOTTAYAM DIVISION
V.PUBLISHERS BLDG, PIN - 686 001.
2 THE COMMISSIONER OF CENTRAL TAX AND CENTRAL
EXCISE, 1 S PRESS ROAD,
COCHIN - 682 018.
3 THE SUPERINTENDENT OF CENTRAL TAX AND CENTRAL
EXCISE,KOTTAYAM DIVISION,
V PUBLISHERS BUILDING,
KOTTAYAM, PIN - 686 001.
BY ADV M.S.AMAL DHARSAN, SC
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 22.02.2022, THE COURT ON 22.03.2022 DELIVERED
THE FOLLOWING:
W.P.(C) No.1188/22 -:2:-
BECHU KURIAN THOMAS, J.
--------------------------------
W.P.(C) No.1188 of 2022
---------------------------------
Dated this the 22nd day of March, 2022
JUDGMENT
The orders rejecting applications for rectification of
mistakes filed under section 74 of the Finance Act, 1994 (for
short 'the Act'), are assailed under Article 226 of the Constitution
of India. The two main grounds of challenge are that the orders
rejecting the applications for rectification failed to consider the
binding judgments of the jurisdictional High Courts and were
issued without granting an opportunity of hearing.
2. Petitioner is a primary agricultural co-operative society.
Petitioner claims that it does not come within the purview of the
Act since it functions on the principles of mutuality and its
activities are confined to its members. For the assessment years,
2013-14 and 2014-15, on the basis of investigation conducted, it
was alleged that, petitioner had provided service in the category
of banking and other financial services, business auxiliary
services etc., for the said period. Pursuant to the notices, two
orders-in-original, both dated 18-12-2018 were rendered,
imposing Rs.2,53,012/- as service tax under section 73(2) of the
Act along with interest and a penalty of Rs. 25,000/- under
section 76(1) of the Act for the year 2013-14 and Rs.2,76,302/-
as service tax under section 73(2) of the Act, apart from interest
and penalty of Rs. 25,000/- under section 76(1) of the Act, for
the year 2014-15.
3. Aggrieved by the orders and allegedly noticing errors
apparent in the orders, applications were filed under section 74
of the Act seeking to rectify the mistakes. However, by the
impugned orders, the applications for rectification were rejected,
challenging which the writ petition has been filed.
4. A counter-statement has been filed on behalf of the
respondents contending that the petitioner has a remedy by way
of appeal under section 85(1) of the Act and that petitioner had
not filed statutory appeals within the time frame of two months
prescribed. It was also pointed out that the application for
rectification was filed after a lapse of three years and also that
the application for rectification cannot, by any means, be
regarded as an appeal so as to re-hear and re-decide the entire
order-in-original. It was further pointed out that, the rectification
of a mistake arises only when there is a mistake apparent on the
face of the record, which must be obvious and not one that can
be understood only after a long drawn out argument or when
there is a debatable point. It was also contended that an
opportunity of hearing was not required to be granted since the
orders in the rectification applications did not have the effect of
enhancing the liability of the assessee as contemplated under
section 74(4) of the Act.
5. I have heard the arguments of Sri.C.A.Jojo, the learned
counsel for the petitioner as well as Sri.M.S.Amal Darshan, the
learned Standing Counsel for the respondents.
6. The normal statutory remedy against an order-in-original
as contemplated under the Act is to prefer an appeal under
section 84 or section 85 or section 86 of the Act, as the case
may be. The orders-in-original, involved in the present dispute
were both issued by the Assistant Commissioner of the Central
Tax and Central Excise and hence the appeal ought to be
preferred under section 85 of the Act. As per section 85 of the
Act, the appeals were to be presented within a period of three
months from the date of receipt of the order and a further period
of three months is available, if there is proof of sufficient cause
for not presenting the appeal within the time limit.
7. In the instant case, admittedly, petitioner had not
preferred any appeal against the two orders-in-original, which
were dated 18-12-2018 and issued on 19-12-2018. Instead of
preferring an appeal, petitioner has preferred rectification
petitions separately for the two assessment years, invoking the
provisions of section 74 of the Act. The applications for
rectification are seen to have been filed on 14-09-2021. The
period stipulated for filing an application for rectification is two
years from the date on which the order was passed. Though
normally, the limitation period for filing rectification petition
would have expired by 18-12-2020, due to the onset of the
COVID-19 pandemic, the Supreme Court extended the period of
limitation in respect of all judicial and quasi-judicial proceedings
from 15-03-2020 till 28-02-2022, as per the judgment in orders
In Re: Cognizance for Extension of Limitation (2022 (1) KLT
315). In view of the above binding precedent, this Court is of
the view that the contention regarding limitation for filing the
rectification petition is of no significance. The applications for
rectification filed by the petitioner is therefore within the period
of limitation.
8. Though the respondents have taken a specific contention
that the applications for rectification is not maintainable since
the same do not satisfy the ingredients of section 74, as what is
sought to be projected under the rectification petitions, is in
effect a rehearing or reconsideration of the order-in-originals, I
am of the view that the said issue need not be considered in the
light of the order that I propose to issue.
9. In the applications filed by the petitioner seeking
rectification, a specific opportunity of hearing was sought.
Indubitably an opportunity of hearing was not granted by the
assessing officer while rejecting the applications for rectification.
Though the statutory requirement of granting an opportunity of
hearing is prescribed as one available only when there is an
order enhancing the liability of the assessee or reducing a refund
due to the assessee, in cases where the assessee had specifically
sought for an opportunity of hearing, the situation assumes a
different colour.
10. In the decision in Uma Nath Pandey and Others v.
State of Uttar Pradesh and Another [(2009) 12 SCC 40], it
was observed as follows:
"10. The adherence to principles of natural justice as recognized by
all civilised States is of supreme importance when a quasi - judicial
body embarks on determining disputes between the parties, or any
administrative action involving civil consequences is in issue. These
principles are well settled. The first and foremost principle is what
is commonly known as audi alteram partem rule. It says that no
one should be condemned unheard. Notice is the first limb of this
principle. It must be precise and unambiguous. It should appraise
the party determinatively of the case he has to meet. Time given
for the purpose should be adequate so as to enable him to make
his representation. In the absence of a notice of the kind and such
reasonable opportunity, the order passed becomes wholly vitiated.
Thus, it is but essential that a party should be put on notice of the
case before any adverse order is passed against him. This is one of
the most important principles of natural justice. It is after all an
approved rule of fair play. The concept has gained significance and
shades with time. When the historic document was made at
Runnymede in 1215, the first statutory recognition of this principle
found its way into the 'Magna Carta'. The classic exposition of Sir
Edward Coke of natural justice requires to 'vocate, interrogate and
adjudicate'. In the celebrated case of Cooper v. Wandsworth Board
of Works [(1863) 143 ER 414], the principle was thus
stated:.................Since then the principle has been chiselled,
honed and refined, enriching its content. Judicial treatment has
added light and luminosity to the concept, like polishing of a
diamond."
11. Similarly in the decision in Krishna Mohan Medical
College Hospital and Another v. Union of India and
Another [(2017) 15 SCC 719], the Supreme Court reiterated
the principle that opportunity of hearing is synonymous to fair
hearing.
12. From the above, it is crystal clear that there cannot be
any doubt, that any decision rendered adversely affecting the
rights and interest of a party, without hearing him, is not liable
to be sustained. However, in the instant case, the provisions of
the statute has incorporated a specific clause that compels the
grant of an opportunity of hearing only when the order in
rectification enhances the liability of the assessee or when refund
is reduced. Since the statute has incorporated specific instances
when there is a mandatory requirement of providing an
opportunity of hearing, the legislative intention is clear that in
other instances an opportunity of hearing is not required to be
granted. However when the assessee sought for grant of an
opportunity of hearing and the same has not been specifically
denied by the assessing officer, it was incumbent upon the officer
to grant an opportunity of hearing to the petitioner.
13. A perusal of the application for rectification reveals that
petitioner had specifically sought for an opportunity of hearing.
Respondents have no case that such an opportunity was refused
by any order in writing and intimated to the petitioner. In such
circumstances, it was incumbent upon the assessing officer to
grant an opportunity of hearing before issuing the orders of
rectification. Thus there is a clear instance of violation of the
principles of natural justice. Ext.P5 and Ext.P6 are liable to be
set aside on that reason itself.
14. Accordingly, Ext.P5 and Ext.P6 are set aside solely on
the ground of violation of principles of natural justice. The first
respondent is therefore directed to grant an opportunity of
hearing to the petitioner. The first respondent is thus directed to
consider the applications for rectification filed by the petitioner
afresh and as expeditiously as possible, at any rate, within a
period of three months from the date of receipt of a copy of the
judgment.
The writ petition is allowed as above.
Sd/-
BECHU KURIAN THOMAS
JUDGE
vps
APPENDIX OF WP(C) 1188/2022
PETITIONER'S/S' EXHIBITS
EXHIBIT P1 A TRUE COPY OF THE ORDER IN ORIGINAL
NO.94/ST(AC)/DIV/208-19 DATED 18/12/2018
BY THE 1ST RESPONDENT.
EXHIBIT P2 A TRUE COPY OF THE APPLICATION FOR
RECTIFICATION OF MISTAKE (ROM) DATED
14/09/2021 SUBMITTED BEFORE THE 1ST
RESPONDENT.
EXHIBIT P3 A TRUE COPY OF THE ORDER IN ORIGINAL
NO.95/ST(AC)/DIV/2018-19 DATED
18/12/2018 BY THE 1ST RESPONDENT.
EXHIBIT P4 A TRUE COPY OF THE APPLICATION FOR
RECTIFICATION OF MISTAKE (ROM) DATED
14/09/2021 SUBMITTED BEFORE THE 1ST
RESPONDENT.
EXHIBIT P5 A TRUE COPY OF THE ORDER ON EXT.P2 ROM
C.NO.V/ST/15/89/2015-ST.ADJ/834 DATED
23/09/2021 BY THE 1ST RESPONDENT.
EXHIBIT P6 A TRUE COPY OF THE ORDER ON EXT.P4 ROM
C.NO.V/ST/15/123/2016-ST/ADJ/835 DATED
23/09/2021 BY THE 1ST RESPONDENT.
