Facts of the Case

The petitioner, M/S Panther Security Guard Services, through its proprietor Chandra Shekhar Singh, approached the Allahabad High Court (Lucknow Bench) challenging an order dated 03.11.2022 confirming a tax demand against it under Section 74 of the GST Act, 2017, and a subsequent appellate order dated 10.07.2023 dismissing its appeal as time-barred. A show cause notice had been issued to the petitioner under Section 74, and while a first reminder had specified a date, time and venue for personal hearing, a second reminder issued the same day left the columns for date, time and venue of personal hearing marked as "NA". The petitioner filed a detailed reply denying the allegations levelled against it, but the adjudicating authority confirmed the demand without granting any opportunity of personal hearing. The subsequent appeal was dismissed solely on the ground of limitation, without any consideration of the merits.

Issues Involved

  1. Whether an assessment order passed under Section 74 of the GST Act without affording the assessee an opportunity of personal hearing violates the mandate of Section 75(4).
  2. Whether the writ court could examine the validity of the assessment order despite the appeal against it having been dismissed on limitation, without merger of the two orders.
  3. Whether the assessment order and the appellate order deserved to be quashed and the matter remanded for fresh adjudication.

Petitioner's Arguments

  • The adjudication order had not merged into the appellate order since the appeal was dismissed on limitation and not decided on merits, so the writ court could examine the assessment order.
  • No opportunity of personal hearing was granted before the order dated 03.11.2022 was passed, in clear violation of the mandatory requirement under Section 75(4) of the GST Act.
  • The second reminder to the show cause notice left the date, time and venue for personal hearing marked "NA", effectively denying any hearing despite a detailed reply having been filed.
  • Reliance was placed on Bharat Mint and Allied Chemicals v. Commissioner of Commercial Tax and M/s Santosh Traders v. State of U.P. (Writ Tax No. 174 of 2023, decided 28.08.2023), where assessment orders were quashed solely for want of an opportunity of hearing under Section 75(4).

Respondent's Arguments

  • The Standing Counsel for the State produced the original records pursuant to the Court's earlier order dated 04.10.2023, without disputing the facts placed on record by the petitioner.

Court Order/Findings

  • On perusing the records, the Court found that the second reminder to the show cause notice indeed left the personal hearing columns marked "NA", and no opportunity of hearing was in fact granted despite the reply filed by the petitioner being noted in the adjudication order.
  • Following its earlier rulings in Bharat Mint and Allied Chemicals and M/s Santosh Traders, the Court held that passing an adverse order under Section 74 without granting an opportunity of personal hearing, as mandated by Section 75(4) of the GST Act, renders the order unsustainable.
  • The order dated 03.11.2022 confirming the demand and the appellate order dated 10.07.2023 dismissing the appeal as time-barred were both quashed.
  • The matter was remanded to the adjudicating authority to pass a fresh order after granting the petitioner an opportunity of hearing in accordance with law.

Important Clarification

  • Section 75(4) mandates a personal hearing before any adverse order is passed under Section 74, and failure to grant such a hearing is fatal to the order regardless of whether a written reply was filed and considered.
  • Where an appeal is dismissed purely on the ground of limitation without a decision on merits, the assessment order does not merge into the appellate order, and the writ court remains free to examine the assessment order independently.

Sections Involved

  • Section 74, Central Goods and Services Tax Act, 2017 – Determination of tax not paid/short paid by reason of fraud, wilful misstatement or suppression of facts.
  • Section 75(4), Central Goods and Services Tax Act, 2017 – Mandatory opportunity of hearing where an adverse decision is contemplated or a request is made in writing.

Decision – In Favour of

The decision is in favour of the Assessee. The writ petition was allowed, both the assessment order and the appellate order were quashed, and the matter was remanded for fresh adjudication after affording the petitioner a proper opportunity of hearing.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Allahabad (Lucknow Bench)
  • Case No.: WRIT TAX No. 194 of 2023
  • CNR: Not available on record
  • Coram: Hon'ble Pankaj Bhatia, J.
  • Decision Date: 12.10.2023
  • Disposal Nature: Allowed - assessment order under Section 74 GST Act and appellate order quashed; matter remanded for fresh hearing

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