Facts of the Case

The petitioner, a sole proprietorship based in Hindupur, Andhra Pradesh, challenged an Assessment Order dated 26.04.2023 (Form GST DRC-07, DIN3713022325782) confirming demand of penalty and interest under the IGST, CGST and SGST Acts, 2017 for tax periods 2017-18 to 2022-23. The petitioner had responded to a pre-show-cause notice dated 27.01.2023, and to a subsequent show-cause notice dated 13.02.2023 issued under Rule 142(3) read with Section 74(1) of the CGST Act, filing a detailed reply on 28.02.2023.

Issues Involved

  1. Whether the impugned assessment order, which recorded that the petitioner appeared on 03.04.2023 and explained the contentions such that no further personal hearing was required, but then proceeded on the footing that the petitioner's written reply was not taken into consideration, violated principles of natural justice.

Petitioner's Arguments

  • The petitioner's counsel pointed to the internal contradiction in the impugned order itself — it recorded personal appearance and explanation of contentions, yet simultaneously stated the reply was not considered — and argued that none of the objections raised in the reply dated 28.02.2023 were actually addressed.

Respondent's Arguments

  • The Government Pleader opposed the writ petition, submitting that the impugned order was passed after considering all relevant material, including the petitioner's reply.

Court Order / Findings

  • On perusing page 14 of the impugned order, the Bench confirmed the internal inconsistency identified by the petitioner, and found no effective discussion anywhere in the order of the petitioner's reply to the show-cause notice.
  • The Court held the impugned order devoid of principles of natural justice, since it failed to genuinely engage with the petitioner's reply despite claiming to have heard the petitioner, and set the order aside.
  • The first respondent was directed to afford a fresh opportunity of personal hearing, consider the reply dated 28.02.2023 on its merits, and pass an appropriate order expeditiously in accordance with law.

Important Clarification

  • An assessment order that mechanically records that the taxpayer appeared and "explained the contentions" (and therefore needed no further hearing), while simultaneously stating that the reply was not considered, exposes a facial contradiction that itself demonstrates non-application of mind — such an order cannot survive judicial review irrespective of whether a hearing was nominally held.
  • Courts will scrutinise the actual text of an assessment order for genuine engagement with the assessee's written submissions, not merely check whether a hearing was recorded as having taken place.

Sections Involved

  • Rule 142(3) of the CGST Rules, 2017 - prescribes the procedure for issuing a summary of show-cause notice.
  • Section 74(1) of the CGST Act, 2017 - covers determination of tax not paid by reason of fraud/wilful misstatement/suppression.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee; the assessment order was set aside and a fresh, reasoned order after proper hearing was directed.

Case Details

High Court of Andhra Pradesh at Amaravati, Writ Petition No.12193 of 2023; Coram: Hon'ble Sri Justice U. Durga Prasad Rao and Hon'ble Sri Justice T. Mallikarjuna Rao; decided on 12 May 2023.

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