2022 (3) TMI 492 - HC - GST

Section 75(4) mandates personal hearing opportunity for taxpayers before adverse GST decisions without request

Bharat Mint And Allied Chemicals Versus Commissioner Commercial Tax And 2 Others

The Allahabad HC allowed a writ petition challenging an adjudication order passed under Section 74 of the CGST/UPGST Act 2017. The court held that Section ... Violation of principles of natural justice - opportunity of personal hearing is mandatory under Section 75(4) of the CGST/UPGST Act 2017 or not - impugned adjudication order has been passed in breach of principle of natural justice or not - HELD THAT:- From perusal of Section 75(4) of the Act, 2017 it is evident that opportunity of hearing has to be granted by authorities under the Act, 2017 where either a request is received from the person chargeable with tax or penalty for opportunity of hearing or where any adverse decision is contemplated against such person. Thus, where an adverse decision is contemplated against the person, such a person even need not to request for opportunity of personal hearing and it is mandatory for the authority concerned to afford opportunity of personal hearing before passing an order adverse to such person. Article 226 of the Constitution of India confers very vide powers on High Courts to issue writs but this power is discretionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition. The impugned order under Section 74 of the Act for the tax period April (year 2019-20) can not be sustained and is hereby quashed - Writ petition is allowed to the extent indicated above with cost of ₹ 10,000/-. 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.