Facts of the Case

M/S B L Pahariya Medical Store challenged an assessment order dated 21.03.2023 passed by the Deputy Commissioner, State Tax, Sector-1, Karvi, raising a demand of over Rs.26 lakhs for the tax period July 2017 to March 2018 under the U.P. GST Act, 2017. The only notice issued in the proceedings was dated 12.07.2022, seeking a reply within 15 days, and the impugned order was passed without a personal hearing having been granted, though the reply to the show cause notice had been entertained on 30.12.2022.

Issues Involved

  1. Whether personal hearing under Section 75(4) of the U.P. GST Act must be afforded even where the assessee has not specifically requested one, before an adverse assessment order can be passed.

Petitioner's Arguments

  • Relying on Section 75(4) of the U.P. GST Act, 2017 as interpreted in Bharat Mint & Allied Chemicals v. Commissioner Commercial Tax, the Assessing Authority was bound to afford an opportunity of personal hearing before passing an adverse order, since the demand of about Rs.26 lakhs was wholly adverse to the petitioner.
  • Reliance was also placed on the Gujarat High Court decision in M/S Hitech Sweet Water Technologies Pvt. Ltd. v. State of Gujarat.

Respondent's Arguments

  • The State's Additional Chief Standing Counsel did not dispute the facts but defended the order on the basis of the record as it stood.

Court Order / Findings

  • Section 75(4) mandates that an opportunity of hearing be granted where a request is received in writing, or where any adverse decision is contemplated against the person.
  • An assessee is not required to specifically request 'opportunity of personal hearing'; it remains mandatory for the Assessing Authority to afford such opportunity before passing any adverse order, and marking 'No' in a column meant to record the assessee's choice bears no legal consequence.
  • Given the impugned order was passed on 21.03.2023 while the reply was entertained only on 30.12.2022, the Court found minimal opportunity of hearing was a must in a matter creating heavy civil liability, both to ensure natural justice and to allow reasoned adjudication.
  • The writ petition was allowed, the order set aside, and the matter remitted with a direction to issue a fresh notice within two weeks, the petitioner undertaking to appear on the next date fixed.

Important Clarification

  • Under Section 75(4) of the GST Act, personal hearing before an adverse order is mandatory whenever an adverse decision is contemplated, irrespective of whether the assessee affirmatively requested a hearing or even marked 'No' against a hearing-preference column; failure to afford it renders the order liable to be set aside.

Sections Involved

  • Section 75(4), CGST/UP GST Act, 2017 - mandatory opportunity of hearing before an adverse order, on request or where adverse decision is contemplated.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the demand order set aside and remitted for fresh adjudication after personal hearing.

Case Details

Court: Allahabad High Court
Case No.: Writ Tax No. 981 of 2023 (Neutral Citation 2023:AHC:168698-DB)
Coram: Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava
Date of Order: 22.08.2023

Link to Download the Order

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