2022 (3) TMI 492 - HC - GST

Personal hearing u/s 75(4) CGST mandatory before adverse Section 74 order; writ quashes demand with costs

HC held that under Section 75(4) CGST/UPGST Act, 2017, grant of personal hearing is mandatory whenever an adverse decision is contemplated, even without a ... Opportunity of personal hearing - principles of natural justice - quashing of order - remand for fresh adjudication - alternative remedy and maintainability of writOpportunity of personal hearing - principles of natural justice - Opportunity of personal hearing under Section 75(4) of the CGST/UPGST Act, 2017 is mandatory where an adverse decision is contemplated against a person. - HELD THAT: - The Court examined Section 75(4) of the Act, 2017 which mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. The provision was interpreted to mean that, if an adverse decision is contemplated, the authority must afford personal hearing even if no written request is made by the person. Reliance upon a decision under a differently worded provision of the Imports and Exports (Control) Act, 1947 was rejected as inapposite because the statutory language in that provision does not correspond to the mandatory hearing requirement contained in Section 75(4) of the CGST/UPGST Act, 2017. [Paras 8, 9, 11]Section 75(4) requires that authorities afford an opportunity of personal hearing where an adverse decision is contemplated; such hearing is mandatory.Alternative remedy and maintainability of writ - quashing of order - remand for fresh adjudication - Whether the impugned adjudication order passed without affording personal hearing merited quashing and whether the writ petition was maintainable despite an alternative statutory remedy of appeal. - HELD THAT: - The Court considered the respondents' contention that the petitioner had an alternative remedy of appeal under Section 107 but observed that availability of an alternative remedy does not automatically bar entertainment of a writ under Article 226. Established exceptions permit writ jurisdiction where there is a total violation of principles of natural justice or where procedure required for decision has not been adopted. The record, including the show cause notice and the assessing authority's order, established that no personal hearing as contemplated by Section 75(4) was afforded; permitting only a written reply did not satisfy the statutory mandate. Given the patent breach of natural justice, the Court held the writ petition to be maintainable and proceeded to set aside the impugned order. [Paras 13, 14, 15, 16, 17]The adjudication order dated 9.11.2021 for the tax period April (year 2019-20) is quashed for breach of the mandatory hearing requirement; the matter is remitted to respondents to pass a fresh order after affording personal hearing.Final Conclusion: Writ petition allowed in part: the assessment order dated 9.11.2021 for April (year 2019-20) is quashed for failure to afford the mandatory personal hearing under Section 75(4); respondents are granted liberty to decide afresh after providing personal hearing, and costs awarded. Issues:Opportunity of personal hearing under Section 75(4) of the CGST/UPGST Act 2017.Adjudication order passed in breach of principle of natural justice.Analysis:1. Opportunity of Personal Hearing: The key issue in this writ petition revolves around whether the opportunity of personal hearing is mandatory under Section 75(4) of the CGST/UPGST Act 2017. The petitioner argued that the impugned assessment order creating a demand of tax, interest, and penalty was passed without affording the opportunity of hearing as required by the Act. The court examined the provisions of Section 75(4) which clearly mandate that an opportunity of hearing must be granted where an adverse decision is contemplated against the person chargeable with tax or penalty. The court emphasized that even if the person does not request a hearing, it is mandatory for the authority to provide this opportunity before passing an adverse order.2. Breach of Natural Justice: The second issue raised was whether the impugned adjudication order was passed in breach of the principle of natural justice. The court scrutinized the show cause notice and found that it did not specify the date, time, and venue for a personal hearing as required by Section 75(4) of the Act. The respondents contended that no hearing was necessary before passing the assessment order, citing a judgment of the Supreme Court. However, the court distinguished this case and highlighted that the Act specifically mandates an opportunity of hearing. The failure to afford the petitioner a proper hearing constituted a violation of natural justice principles.3. Alternative Remedy: The respondents argued that the petitioner had an alternative remedy of appeal under Section 107 of the Act, making the writ petition not maintainable. However, the court clarified that the availability of an alternative remedy does not bar the filing of a writ petition under Article 226 of the Constitution, especially in cases where there is a gross violation of principles of natural justice. Since the impugned order lacked a proper hearing as required by law, the court deemed the writ petition maintainable.4. Judicial Discretion: The court discussed the discretionary power conferred by Article 226 of the Constitution on High Courts to issue writs. It highlighted exceptions where a writ petition may be entertained despite the availability of alternative remedies, such as when there is a violation of natural justice principles or when fundamental rights are at stake. The court cited various legal precedents to support the exceptions to the rule of alternative remedy, emphasizing the importance of upholding justice and fairness in legal proceedings.5. Decision: In conclusion, the court ruled that the impugned order dated 9.11.2021 could not be sustained due to the lack of a proper opportunity of personal hearing. The order was quashed, and the respondents were granted liberty to pass a fresh order in accordance with the law after affording the petitioner a fair hearing. The writ petition was allowed with costs imposed. Additionally, the court directed the Commissioner of Commercial Tax, U.P., to ensure that principles of natural justice under Section 75(4) of the CGST/UPGST Act 2017 are followed by assessing authorities in the State of Uttar Pradesh.