Facts of the Case

The petitioner, Hindustan Construction Company Ltd., filed two connected writ petitions challenging Order No. 43 dated 24.06.2022 imposing interest and penalty and Order No. 42 dated 24.06.2022 imposing interest for delayed payment of GST, passed by the Joint Commissioner, State GST, Circle Nimbahera.

The petitioner contended that although a detailed reply to the show cause notice had been submitted along with a request for a personal hearing, the adjudicating authority passed the impugned orders without properly considering the reply and in violation of the mandatory provisions of the CGST Act. During the proceedings, the High Court directed the concerned Joint Commissioner to remain personally present with the original records to explain the circumstances under which the orders had been passed.

Issues Involved

  1. Whether the adjudicating authority violated Section 75 of the CGST Act, 2017 while passing orders imposing interest and penalty.
  2. Whether failure to consider the detailed reply submitted by the taxpayer renders the adjudication order unsustainable.
  3. Whether an order passed without assigning reasons violates Section 75(6) of the CGST Act.
  4. Whether non-speaking orders passed without proper application of mind are liable to be quashed.

Petitioner's Arguments

  • The petitioner submitted that a comprehensive reply to the show cause notice had been filed.
  • A specific request for personal hearing was also made before adjudication.
  • The impugned orders were passed without considering the detailed reply furnished by the petitioner.
  • The assessment orders were non-speaking, arbitrary, and passed in violation of the principles of natural justice and the mandatory provisions of Section 75 of the CGST Act.
  • The petitioner therefore sought quashing of the impugned orders and a fresh adjudication after granting due opportunity of hearing.

Respondents' Arguments

  • The Joint Commissioner personally appeared before the High Court along with the original dispatch register.
  • The respondents submitted that the notice for personal hearing had been duly dispatched and served upon the petitioner's representative.
  • It was further contended that the petitioner had already been informed about the next date of hearing through the order-sheet dated 30.05.2022, and therefore no separate notice was necessary.
  • According to the respondents, the petitioner failed to appear on the scheduled date, resulting in ex parte adjudication.
  • However, the respondents were unable to dispute that the detailed written submissions filed by the petitioner had not been considered while passing the impugned orders.

Court Order / Findings

The Rajasthan High Court observed that the original records established that an opportunity of personal hearing had in fact been provided to the petitioner and accordingly the earlier allegations of mala fides against the Joint Commissioner were withdrawn by the petitioner.

However, the Court found that the adjudicating authority had failed to consider the detailed written reply submitted by the petitioner before passing the impugned orders.

The Court held that the impugned orders were non-speaking, suffered from non-application of mind, and were in clear violation of the mandatory requirement contained in Section 75(6) of the CGST Act, 2017, which obligates the proper officer to record the relevant facts and the basis of the decision.

Accordingly, the High Court quashed and set aside both the impugned orders and directed the petitioner's representative to appear before the Joint Commissioner on 22.12.2022. The authority was directed to grant an opportunity of hearing and thereafter pass a fresh reasoned order in accordance with law.

The show cause notice earlier issued by the High Court to the Joint Commissioner was also discharged.

Important Clarification

  • Section 75(6) of the CGST Act mandates that every adjudication order must contain the relevant facts and the basis of the decision.
  • A non-speaking order passed without considering the taxpayer's reply is liable to be quashed.
  • Even where an opportunity of personal hearing has been provided, the adjudicating authority must independently examine and discuss the written submissions of the taxpayer.
  • The judgment reinforces that reasoned orders are an essential component of natural justice under GST adjudication.
  • The High Court clarified that the orders were set aside because of non-application of mind and violation of Section 75(6), and not because the hearing notice had not been served.

Sections Involved

  • Section 75(6) of the Central Goods and Services Tax Act, 2017 – Requirement to record relevant facts and reasons in the adjudication order.
  • Section 75 of the Central Goods and Services Tax Act, 2017 – General provisions relating to determination of tax.
  • Article 226 of the Constitution of India – Writ Jurisdiction of High Courts.

Link to download the order - https://mytaxexpert.co.in/uploads/1782894989_215compressed.pdf

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