Appellate Authority cannot reject the adjournment application on its own and decide the case on ex parte basis.

Case Title: Khandelwal Extractions Ltd. v. State of U.P.

Court: High Court of Allahabad

Petition No.: Writ Tax No. 1605 of 2018

Category: Classification and Input Tax Credit

Date of Judgment: 14 December 2018

Relevant Sections: Sections 97, 100, and 101(2) of CGST Act, 2017; Chapter V of CGST Rules, 2017

Facts of the Case

[Para 1–3, 4]

• The petitioner, a manufacturer of vegetable oil, sought Advance Ruling under Section 97 CGST Act, 2017 on classification of Mahua De-oiled Cake and De-oiled Rice Bran, and eligibility of full ITC on inputs used in manufacturing.
• The AAR ruled that these items are by-products used in cattle/fish/poultry feed and are partially eligible for ITC due to use in both taxable and exempt supplies.

[Para 4–8]

• Dissatisfied, the petitioner appealed under Section 100 CGST Act.
• The notice for hearing was issued via email on 20.09.2018 for a hearing on 26.09.2018. Due to intervening holidays, petitioner sought an adjournment which was denied.
• The Appellate Authority proceeded ex parte and upheld AAR’s order on two counts while modifying the rest.

Question(s) in Consideration

[Para 2]

1. Whether Mahua De-oiled Cake is classifiable under HSN 2309 when used as fish/aquatic feed.
2. Whether De-oiled Rice Bran is classifiable under HSN 2308 for cattle/poultry feed use.
3. Whether full Input Tax Credit is available on Mahua/Rice Bran oil cakes used in solvent extraction.

Observation of Court

[Para 13–17]

• The court noted that Advance Ruling mechanisms are to resolve potential disputes quickly and efficiently.
• It found the refusal to adjourn the first hearing, especially when over 60 days had lapsed without any notice, as “harsh and unreasonable”.
• The court emphasized the need for a fair hearing and suggested that likely hearing dates should be indicated upon filing, and adequate time (ideally 21 days) should be given for appearance.

Judgment of the Court

[Para 18–21]

• The High Court quashed the ex parte order dated 12.10.2018 passed by the Appellate Authority.
• The case was remanded for fresh adjudication within two months from submission of certified copy of the judgment.
• The petitioner was directed not to seek undue or long adjournments.
• Authorities were advised to follow proper notice and scheduling procedures going forward.

Between Fine Lines

This case highlights that even in tax adjudication, principles of natural justice must be respected. An ex parte decision without reasonable notice violates fair procedure. The court reinforced that speedy resolution should not come at the cost of due opportunity to be heard.

Summary of Referred Cases

Takeaway:

“Timely Hearing Must Not Trump Fair Hearing: GST Appeal Rights Restored”