Facts of the Case

The petitioner, M/S Sumit Enterprises, Badel Nawabganj, Barabanki, through its proprietor Atul Kumar, challenged the order dated 29.3.2023 dismissing its appeal as time-barred, and the underlying order dated 15.3.2022 raising a demand under Section 74 of the GST Act. The petitioner had inadvertently availed ITC that was never utilised, and filed a corrected return in July 2019. Despite this, a show cause notice dated 25.6.2021, based on a survey conducted on 27.4.2019, proposed a liability of Rs.1,48,160. The petitioner sought an adjournment citing its advocate's illness and requested a personal hearing. Two reminder notices followed on 17.9.2021 and 13.12.2021; the petitioner did not reply, and the order was passed on 15.3.2022. In both the original notice and the reminders, the column for date, time and venue of personal hearing was marked "NA."

Issues Involved

  1. Whether the order dated 15.3.2022 raising a demand under Section 74 of the GST Act was passed without affording an opportunity of personal hearing in violation of Section 75(4).
  2. Whether an appellate order dismissing the appeal as time-barred can stand once the underlying order is found void for breach of natural justice.

Petitioner's Arguments

  • The mistaken availing of ITC, later corrected by filing a revised return, was bona fide and the credit was never utilised.
  • Sought an adjournment on account of the advocate's illness and explicitly requested a personal hearing before any adverse decision was taken.
  • Pointed out that in both the original notice and reminder notices, the fields for date, time and venue of personal hearing were simply marked "NA," showing no hearing was ever contemplated or granted.
  • Primarily pressed the challenge to the original order under Section 74, arguing it was passed without an opportunity of hearing as mandated by Section 75(4) of the GST Act.

Respondent's Arguments

  • The Standing Counsel, based on instructions and the record, conceded that no personal hearing was in fact granted to the petitioner, which was also evident from the impugned order itself.

Court Order/Findings

  • Held that Section 75(4) of the GST Act mandatorily requires an opportunity of hearing where an adverse decision is contemplated, following the Court's own earlier ruling in Party Time Hospitality v. State of U.P. (Writ Tax No.176 of 2023, decided 28.8.2023).
  • Found the original order dated 15.3.2022 was passed contrary to this mandate and in violation of natural justice, and accordingly quashed it.
  • Since the original order was quashed, held the appellate order dated 29.3.2023 dismissing the appeal as time-barred also could not survive, and quashed it too.
  • Remanded the matter to respondent no.3 to pass fresh orders after granting a hearing and permitting the petitioner to reply to the show cause notice.
  • Allowed the writ petition.

Important Clarification

  • Marking "NA" against the personal-hearing fields in a show cause notice and its reminders, without more, is treated as conclusive proof that no hearing opportunity was afforded, regardless of what the final order recites.
  • Section 75(4) of the GST Act is mandatory, not directory — any adverse order under Section 74 passed without a personal hearing is liable to be quashed on that ground alone, independent of the merits of the tax demand.
  • Quashing the primary demand order for breach of natural justice automatically nullifies a subsequent appellate order rejecting the appeal on limitation, since the entire proceeding is reopened.

Sections Involved

  • Section 74 of the Central Goods and Services Tax Act, 2017 – deals with determination of tax not paid or short paid by reason of fraud or wilful misstatement.
  • Section 75(4) of the Central Goods and Services Tax Act, 2017 – mandates an opportunity of hearing before an adverse order is passed.

Decision – In Favour of

The order is in favour of the Assessee. The demand order and the appellate rejection were both quashed, and the matter remanded for fresh adjudication after a hearing.

Related Case Laws

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

Case Details

  • Court: Allahabad High Court, Lucknow Bench
  • Case No.: Writ Tax No. 167 of 2023
  • CNR: 2023:AHC-LKO:64847
  • Coram: Hon'ble Pankaj Bhatia, J.
  • Decision Date: 09.10.2023
  • Disposal Nature: Allowed; Section 74 GST demand order and appellate rejection quashed and remanded for opportunity of hearing under Section 75(4)

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