Facts of the Case

The petitioner, M/s Paras Industrial Sales, challenged the assessment order dated 13.09.2022, passed under Section 74 of the CGST/UPGST Act, 2017, on the ground that it was passed without granting the mandatory opportunity of personal hearing.

Upon receipt of the show cause notice dated 17.12.2021, the petitioner submitted its reply on 23.12.2021 in Form GST DRC-06 and specifically opted for a personal hearing by selecting the relevant option in the prescribed form. However, before passing the impugned assessment order, the adjudicating authority neither communicated the date, time, nor venue of the personal hearing, thereby denying the petitioner an effective opportunity to present its case.

Issues Involved

  1. Whether an assessment order passed under Section 74 of the CGST/UPGST Act, 2017 without granting a requested personal hearing is sustainable in law.
  2. Whether Section 75(4) of the CGST/UPGST Act, 2017 makes personal hearing mandatory where requested by the taxpayer or where an adverse order is proposed.
  3. Whether a writ petition under Article 226 of the Constitution of India is maintainable despite the availability of an appellate remedy under Section 107 in cases involving violation of natural justice.
  4. Whether mentioning "NA" against the date, time and venue of hearing in the show cause notice satisfies the statutory requirement of personal hearing.

Petitioner's Arguments

  • The petitioner submitted that it had duly filed a reply to the show cause notice through Form GST DRC-06.
  • It specifically exercised its right to seek a personal hearing before adjudication.
  • Despite such request, the department failed to intimate the date, time and venue of the hearing.
  • The petitioner relied upon the Division Bench judgment in Bharat Mint and Allied Chemicals vs Commissioner Commercial Tax & Others, contending that Section 75(4) makes grant of personal hearing mandatory.
  • It was argued that the assessment order was passed in violation of the principles of natural justice and therefore deserved to be quashed.

Respondents' Arguments

  • The Revenue contended that the notice dated 17.12.2021 was merely a reminder to an earlier notice dated 27.08.2020.
  • According to the department, since the petitioner had not responded to the earlier notice, no further opportunity of personal hearing was required.
  • The respondents therefore defended the validity of the assessment proceedings.

Court Order / Findings

The Allahabad High Court held that Section 75(4) of the CGST/UPGST Act, 2017 makes it mandatory to provide a personal hearing:

  • whenever the taxable person requests such hearing; or
  • whenever an adverse decision is proposed against the taxpayer.

The Court observed that although the show cause notice mentioned that the petitioner could appear for personal hearing, the columns relating to the date, time and venue were marked "NA", thereby effectively denying any opportunity of hearing.

The Court further noted that the petitioner had expressly opted for a personal hearing while filing Form GST DRC-06, yet no hearing was granted before passing the assessment order.

Relying upon the Division Bench decision in Bharat Mint and Allied Chemicals vs Commissioner Commercial Tax & Others, the Court held that denial of personal hearing amounted to a clear violation of Section 75(4) and the principles of natural justice.

The Court also reiterated that where there is a gross violation of natural justice, the existence of an alternative remedy under Section 107 does not bar the exercise of writ jurisdiction under Article 226.

Accordingly, the High Court set aside the assessment order dated 13.09.2022 and remanded the matter to the adjudicating authority with a direction to pass a fresh order after granting the petitioner a proper opportunity of personal hearing in accordance with law. The petitioner was also directed to cooperate in the fresh proceedings.

Important Clarification

  • Section 75(4) mandates personal hearing whenever requested by the taxpayer or whenever an adverse order is contemplated.
  • Mentioning "NA" against the date, time and venue of hearing does not amount to compliance with the statutory requirement of personal hearing.
  • Denial of personal hearing constitutes a violation of the principles of natural justice and renders the assessment order unsustainable.
  • The availability of an appellate remedy under Section 107 does not bar a writ petition where mandatory procedural safeguards are violated.
  • The judgment follows the binding precedent in Bharat Mint and Allied Chemicals vs Commissioner Commercial Tax & Others, reaffirming the mandatory nature of personal hearing under GST law.

Sections Involved

  • Section 74 of the Central Goods and Services Tax Act, 2017 – Determination of Tax Not Paid or Short Paid by Reason of Fraud, Wilful Misstatement or Suppression of Facts.
  • Section 75(4) of the Central Goods and Services Tax Act, 2017 – Opportunity of Personal Hearing.
  • Section 107 of the Central Goods and Services Tax Act, 2017 – Appeals to Appellate Authority.
  • Article 226 of the Constitution of India – Writ Jurisdiction of High Courts.

Link to download the order - https://mytaxexpert.co.in/uploads/1782896071_223compressed.pdf

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