High Court Slams GST Department Over Denial of Hearing: Upholds Natural Justice in Merino Industries Case

MERINO INDUSTRIES LTD. VERSUS STATE OF UTTAR PRADESH AND ANOTHER - 2025 (4) TMI 1010 - ALLAHABAD HIGH COURT

⚖️ Key Issue

Whether the failure to provide an opportunity of personal hearing, despite a specific request under Section 75(4)of the CGST/SGST Act, 2017, vitiates the assessment order passed under Section 74 of the Act.

📝 Background

• Merino Industries Ltd., a manufacturer of potato flakes, received a show cause notice (SCN) dated 03.08.2024, proposing to classify their product under HSN 2005 (higher tax rate) instead of 1105.

• The SCN did not mention any date/time for personal hearing, instead marking those fields as 'N.A.'

• The petitioner filed a detailed reply on 19.08.2024 explicitly requesting a personal hearing before any adverse action.

• Despite this, the Joint Commissioner, SGST, issued an order dated 04.02.2025, creating a demand of ₹5.82 crores, without granting the requested personal hearing.

🔍 Court’s Observations

1. Violation of Section 75(4):
   Section 75(4) mandates that an opportunity of hearing must be granted where a written request is made or where any adverse decision is contemplated.

2. Pattern of Ignoring Due Process:
   The Court cited Laskin Engineering Pvt Ltd Versus State of U.P. and Another - 2024 (5) TMI 1555 - ALLAHABAD HIGH COURT, which had already flagged systemic violations of natural justice, especially:

   • “N.A.” marked in place of hearing dates.

   • Mechanical passing of orders ignoring specific hearing requests.

   • Use of the online system to deny real notice or service.

3. Disregard of Circulars & Judicial Orders:
   The Court emphasized that despite clear circulars dated 13.06.2024 and 12.11.2023 (misstated as 2024), the department continued to act mechanically.

4. Consequences of Bureaucratic Apathy:
   The Court lamented the burden this conduct places on the judiciary and the loss of administrative time for the State. It observed that hundreds of such petitions flood the court daily, all pointing to the same systemic failure.

🧑‍⚖️ Final Order & Directions

✅ Writ Petition Allowed.
✅ Order dated 04.02.2025 Quashed.
✅ Matter Remanded to the Joint Commissioner SGST, Corporate Circle-1, Ghaziabad for fresh adjudication after affording a personal hearing.

⚠️ Cost of ₹20,000 imposed on the concerned Joint Commissioner, to be deposited with the High Court Legal Services Committee within 4 weeks.

📣 Commissioner of Commercial Tax, U.P. directed to:

• Ensure training of officers on principles of natural justice.

• Consider disciplinary proceedings against erring officials.

• Circulate the Court’s directions for strict compliance.

💡 Why This Judgment Matters

• 🔍 Natural Justice Reinforced: The Court reiterated that online notices and automated processes cannot override basic procedural fairness.

• 🛑 Mechanical Governance Criticized: The judiciary strongly discouraged “rubber-stamp” decision-making.

• 📣 Wake-Up Call for GST Officers: There is institutional pressure now to change conduct and follow due process.

🧾 Takeaways for Businesses & Practitioners

1. ✅ Always request a personal hearing in writing in response to any SCN under GST.

2. 📤 Document all replies and communications made via the portal.

3. ⚖️ Challenge orders passed without a hearing, even if the reply is acknowledged.

4. 🏛️ In similar circumstances, writ remedy is available, especially where no tribunal exists or natural justice is violated.