Facts of the Case

The petitioner, Party Time Hospitality (proprietor Smt. Punita Gupta), challenged an order dated 16.11.2021 confirming a demand under Section 74 of the GST Act, and the subsequent order dated 04.08.2023 dismissing its appeal as time-barred under Section 107. The petitioner had taken a party lawn on lease from 01.08.2018 and claimed no connection with its affairs before that date. A show-cause notice dated 28.09.2021 purportedly invoked Section 74 but did not indicate how the fraud/wilful-misstatement/suppression ingredients of that provision were attracted, nor did it specify any date, time or venue for personal hearing; the petitioner did not reply, and the demand was confirmed for July 2017 to March 2018 — a period predating the petitioner's own lease.

Issues Involved

  1. Whether an assessment order passed under Section 74 without affording personal hearing, and without a show-cause notice disclosing particulars of the alleged fraud/suppression, could stand.
  2. Whether dismissal of the consequent appeal as time-barred could be sustained where the original order itself suffered from these defects.

Petitioner's Arguments

  • The petitioner relied on this Court's own decisions in M/s Mohini Traders (Writ Tax No.550 of 2023), M/s Lari Almirah House (Writ Tax No.1569 of 2022), and Bharat Mint & Allied Chemicals (Writ Tax No.1029 of 2021), all holding personal hearing under Section 75(4) mandatory irrespective of whether a reply is filed.

Respondent's Arguments

  • The respondent's counsel argued that the petitioner had not filed any reply despite the show-cause notice, and in any event the appeal was rightly dismissed as beyond the prescribed limitation period.

Court Order / Findings

  • The Court found that no hearing had admittedly been accorded to the petitioner, contrary to the mandate of Section 75(4) of the GST Act, and that as an expropriatory action, principles of natural justice had to be complied with regardless.
  • Following M/s Mohini Traders and the other cited precedents, the Court set aside both the assessment order dated 16.11.2021 and the appellate order dated 04.08.2023, and remanded the matter for a fresh order after affording an opportunity of hearing.

Important Clarification

  • A show-cause notice invoking Section 74 of the GST Act (fraud/wilful-misstatement/suppression) must set out the particulars constituting the alleged fraud or suppression; a notice that merely quantifies the demand without such particulars, coupled with denial of personal hearing under Section 75(4), renders the resulting assessment order unsustainable regardless of whether the assessee filed a reply.
  • Where the foundational assessment order itself is vitiated for want of natural justice, a limitation-based dismissal of the appeal against it does not cure the defect; both orders are liable to be set aside together.

Sections Involved

  • Section 74 of the CGST Act, 2017 - covers determination of tax not paid by reason of fraud, wilful misstatement or suppression of facts.
  • Section 75(4) of the CGST Act, 2017 - mandates opportunity of personal hearing before an adverse order.
  • Section 107 of the CGST Act, 2017 - the limitation provision under which the appeal was dismissed.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee; both the assessment and appellate orders were set aside and the matter remitted for a fresh order after hearing.

Case Details

High Court of Judicature at Allahabad, Lucknow Bench, Writ Tax No. 176 of 2023, Neutral Citation 2023:AHC-LKO:57456; Coram: Hon'ble Pankaj Bhatia, J.; decided on 28 August 2023.

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