Facts of the Case

The petitioner challenged the assessment order dated 06.09.2022, as rectified on 13.09.2022, passed under Section 74 of the CGST/UPGST Act, 2017.

The petitioner submitted that after receiving the Show Cause Notice dated 17.12.2021, it filed a detailed 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.

Despite the request, the GST authority neither communicated the date, time nor venue of the personal hearing and proceeded to pass the assessment order.

The Revenue defended the action by contending that the notice dated 17.12.2021 was merely a reminder notice because the petitioner had not replied to an earlier notice dated 27.08.2020.

Issues Involved

  1. Whether granting a personal hearing under Section 75(4) of the CGST/UPGST Act is mandatory before passing an adverse assessment order.
  2. Whether an assessment order passed without affording the requested personal hearing violates the principles of natural justice.
  3. Whether the existence of an appellate remedy under Section 107 bars the High Court from entertaining a writ petition where there is a violation of natural justice.

Petitioner’s Arguments

  • The petitioner argued that while submitting the reply in Form GST DRC-06, it had expressly requested a personal hearing.
  • No notice specifying the date, time and venue of the hearing was ever communicated before passing the assessment order.
  • The petitioner relied upon the Division Bench judgment in Bharat Mint and Allied Chemicals vs Commissioner Commercial Tax & Others, wherein it was held that Section 75(4) makes personal hearing mandatory whenever requested or whenever an adverse order is contemplated.
  • It was submitted that the assessment order was liable to be quashed for violation of statutory provisions and principles of natural justice.

Respondent’s Arguments

  • The Revenue contended that the notice dated 17.12.2021 was only a reminder notice.
  • It was argued that since the petitioner had failed to submit any reply to the earlier notice dated 27.08.2020, no further opportunity of personal hearing was required.
  • The respondents therefore justified the assessment order passed under Section 74 of the Act.

Court Order / Findings

The Allahabad High Court allowed the writ petition and held that Section 75(4) of the CGST/UPGST Act makes the grant of personal hearing mandatory in two situations:

  • Where the taxable person requests a personal hearing; or
  • Where the authority proposes to pass an adverse order.

The Court observed that:

  • The Show Cause Notice itself mentioned that the petitioner could appear for personal hearing, yet the columns relating to date, time and venue were marked as "NA".
  • The petitioner had specifically requested personal hearing in Form GST DRC-06, but no hearing was ever granted.
  • Denial of personal hearing amounted to violation of Section 75(4) as well as the principles of natural justice.
  • Although an appellate remedy under Section 107 was available, the writ petition was maintainable because violation of natural justice constitutes a recognised exception to the rule of alternative remedy.

Accordingly, the assessment order dated 06.09.2022, as rectified on 13.09.2022, was set aside, and the matter was remanded to the proper officer for passing a fresh order after granting a proper opportunity of personal hearing.

Important Clarification

  • Personal hearing under Section 75(4) is a mandatory statutory requirement whenever specifically requested by the taxpayer or whenever an adverse order is proposed.
  • Merely issuing a Show Cause Notice without specifying the date, time and venue of hearing does not satisfy the statutory requirement.
  • The availability of an appeal under Section 107 does not prevent the High Court from exercising writ jurisdiction where there is a clear violation of natural justice.
  • Assessment orders passed without complying with Section 75(4) are liable to be quashed irrespective of the merits of the tax demand.
  • GST authorities must strictly comply with procedural safeguards before finalising proceedings under Section 74.

Key Takeaway

The Allahabad High Court reaffirmed that Section 75(4) of the CGST/UPGST Act is mandatory, and no assessment under Section 74 can be sustained where the taxpayer is denied the requested personal hearing. The judgment further reiterates that breach of natural justice constitutes a valid ground for invoking writ jurisdiction notwithstanding the statutory appellate remedy.

Sections Involved

  • Section 74 of the Central Goods and Services Tax Act, 2017 / Uttar Pradesh Goods and Services Tax Act, 2017 – Determination of tax involving fraud, wilful misstatement or suppression of facts.
  • Section 75(4) of the CGST/UPGST Act, 2017 – Mandatory opportunity of personal hearing.
  • Section 107 of the CGST/UPGST Act, 2017 – Appeal to Appellate Authority.
  • Article 226 of the Constitution of India – Writ Jurisdiction.
  • Principle of Natural Justice (Audi Alteram Partem).

Link to download the order - https://mytaxexpert.co.in/uploads/1782968966_228compressed.pdf

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