Facts of the Case

The petitioner, M/s. Suvarna Traders, challenged the order dated 05.05.2022 passed by the Assistant Commissioner (State Tax), Maredpally Circle, Hyderabad, confirming alleged excess Input Tax Credit (ITC) of Rs.36,21,951/- under CGST and an equivalent amount under SGST for the tax period April 2019 to March 2020.

The petitioner contended that the assessment order and consequential demand notice were passed without granting an effective opportunity of personal hearing, thereby violating the principles of natural justice. The petitioner further submitted that its GST registration had already been cancelled on 19.01.2021, due to which it could not access the GST common portal where the department claimed to have uploaded notices.

 

Issues Involved

  1. Whether an adjudication order under the GST law can be sustained without granting a personal hearing as contemplated under Section 75(4) of the CGST Act, 2017.
  2. Whether uploading notices on the GST common portal constitutes valid service under Section 169 of the CGST Act, particularly where the taxpayer claims inability to access the portal after cancellation of GST registration.
  3. Whether the assessment order passed without effective compliance with the principles of natural justice deserves to be set aside.

 

Petitioner's Arguments

  • The impugned assessment order was passed without issuing any effective notice of personal hearing.
  • Absence of personal hearing violated the mandatory requirements of Section 75(4) of the CGST Act, 2017.
  • Since the petitioner's GST registration had already been cancelled on 19.01.2021, it was unable to access the GST common portal.
  • Consequently, the petitioner could not view or respond to the notices allegedly uploaded by the department.
  • The assessment order and demand notice were therefore illegal, arbitrary and liable to be quashed for violation of principles of natural justice.

 

Respondent's Arguments

The State Tax Department submitted that:

  • Show cause notice had been issued.
  • Reminder notices were also issued.
  • Notice of personal hearing as well as the show cause notice had been uploaded on the GST common portal.
  • Uploading notices on the common portal constitutes valid service under Section 169 of the CGST Act, 2017.
  • The department further referred to intelligence inputs alleging that the petitioner had not carried on genuine business activities and had allegedly passed on ITC through invoices without actual supply of goods.

 

Court Findings / Order

The Telangana High Court observed that:

  • Section 75(4) of the CGST Act contains two situations requiring personal hearing.
  • Personal hearing is mandatory where:
    • the taxpayer requests it in writing; or
    • an adverse decision is proposed against the taxpayer.
  • Whenever an adverse order is contemplated, principles of natural justice require that the affected person be granted an effective opportunity of hearing.
  • Considering the petitioner's explanation regarding cancellation of GST registration and inability to access the GST portal, the Court found that interests of justice required granting one more opportunity.

Accordingly, the Court:

  • Set aside the assessment order dated 05.05.2022.
  • Remanded the matter to the Assistant Commissioner (State Tax).
  • Directed that the impugned order itself shall be treated as a show cause notice.
  • Granted the petitioner 15 days to submit its reply.
  • Directed the adjudicating authority to pass a fresh order after granting due opportunity of hearing, including personal hearing, in accordance with law.

The writ petition was accordingly disposed of without costs.

 

Important Clarification

This judgment reiterates that:

  • Personal hearing under Section 75(4) of the CGST Act is not a mere procedural formality.
  • Whenever an adverse GST adjudication is proposed, authorities must ensure meaningful compliance with principles of natural justice.
  • Even where service through the GST portal is legally recognized under Section 169, courts may intervene if circumstances indicate that the taxpayer was genuinely unable to access the portal and consequently lost the opportunity to defend the case.
  • Courts may set aside such assessment orders and remand the matter for fresh adjudication with proper hearing.

 

Sections Involved

  • Section 75(4), Central Goods and Services Tax Act, 2017
  • Section 169, Central Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India

 

Link to Download the order-https://www.mytaxexpert.co.in/uploads/1783932211_194compressed.pdf

 

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