Writ Petition No.12193 of 2023

Facts of the Case

The petitioner, a proprietary business based at Hindupur, challenged an assessment order dated 26.04.2023 passed in Form GST DRC-07 under Section 74(1) of the CGST/SGST Act for tax periods 2017-18 to 2022-23. A pre-show cause notice dated 27.01.2023 was met with the petitioner's reply dated 01.02.2023; thereafter a show cause notice dated 13.02.2023 under Rule 142(3) read with Section 74(1) was issued, to which the petitioner submitted a detailed reply dated 28.02.2023. The impugned order recorded that the petitioner appeared on 03.04.2023 and explained his contentions, and on that basis held that no further personal hearing was required before the order was passed.

Issues Involved

  1. Whether the assessment order genuinely considered the petitioner's detailed reply dated 28.02.2023 to the show cause notice.
  2. Whether recording that the petitioner "appeared and explained" without discussing the reply amounted to compliance with natural justice.
  3. Whether the impugned order was liable to be set aside for failure to deal with the objections raised.

Petitioner's Arguments

  • Counsel for the petitioner submitted that the impugned order curiously recorded that the reply was not taken into consideration, even while claiming that the petitioner had appeared and explained his contentions on 03.04.2023.
  • It was argued that the assessing authority passed the order without engaging with the crucial aspects raised in the detailed reply dated 28.02.2023, rendering the order violative of natural justice.

Respondent's Arguments

  • The Government Pleader for Commercial Tax opposed the writ petition, submitting that the impugned order was passed only after considering all relevant material, including the petitioner's reply, and that adequate opportunity had been afforded.

Court Order / Findings

  • On perusing the impugned order, the Court found that although it recorded the petitioner's appearance and explanation on 03.04.2023, there was no effective discussion of the reply notice submitted against the show cause notice.
  • The Court held that none of the objections raised in the reply dated 28.02.2023 were considered, making the order one-sided and violative of the principles of natural justice.
  • The assessment order dated 26.04.2023 was set aside, and the matter remanded with a direction to afford an opportunity of personal hearing, hear the petitioner with reference to his reply dated 28.02.2023, and pass an appropriate order on merits in accordance with law, expeditiously. The writ petition was allowed without costs.

Important Clarification

  • An assessment order that merely records a taxpayer's appearance without engaging with the substance of a filed reply does not satisfy natural justice, even where a personal hearing nominally took place.
  • Courts will scrutinise the internal consistency of an order — here, the coexistence of a recorded appearance with an admission that the reply was not considered was itself fatal to the order.
  • A detailed, point-wise reply to a show cause notice under Section 74 must be met with a corresponding, reasoned discussion in the final order; a generic recital that submissions were "considered" is not a substitute for actually engaging with the specific objections raised.

Sections Involved

  • Section 74, CGST Act, 2017 — determination of tax not paid, short paid, or ITC wrongly availed, by reason of fraud or wilful misstatement, for tax periods spanning 2017-18 to 2022-23 in this case.
  • Rule 142(3), CGST Rules, 2017 — prescribes the procedure for issuance of notice and summary of the show cause notice.
  • Form GST DRC-07 — summary of the order communicating the demand of tax, interest and penalty.
  • Article 226, Constitution of India — invoked for a writ of mandamus declaring the assessment order without jurisdiction and violative of natural justice.

Decision – In Favour of

The decision is in favour of the assessee, with the assessment order set aside and the matter remanded for a fresh personal hearing that genuinely considers the petitioner's reply.

Case Details

Court: High Court of Andhra Pradesh at Amaravati
Case Number: Writ Petition No.12193 of 2023
Coram: Hon'ble Sri Justice U. Durga Prasad Rao and Hon'ble Sri Justice T. Mallikarjuna Rao
Date of Order: 12.05.2023

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