THE NATTAKOM SERVICE CO-OPERTIVE BANK LTIMITED,NO.3839 vs. THE ASSISTANT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE KOTTAYAM DIVISION

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:

THE ASSISTANT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, KOTTAYAM DIVISION V.PUBLISHERS BLDG, PIN - 686 001.

THE COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, 1 S PRESS ROAD, COCHIN - 682 018.

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:

-: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

-:3:- 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

-:4:- 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

-:5:- 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.

-:6:- 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

-:7:- 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

-:8:- 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

-:9:- 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

-:10:- 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.