GST demand adjudication without personal hearing u/s 75(4) despite adverse decision; order quashed and remanded for fresh hearing.

Section 75(4) of the CGST Act mandates grant of a personal hearing not only when requested in writing but also whenever an adverse decision is contemplated. The Department's contention that proceedings were conducted online and no hearing was necessary absent a request was rejected as contrary to s.75(4) and violative of natural justice. Consequently, without examining merits of the GST demand, interest, or penalty, the HC quashed the adjudication order and the summary orders in Form DRC-07, and remanded the matter for fresh consideration after affording a personal hearing on the stipulated date.

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Issues:
Challenging legality and validity of Order-in-original, violation of GST Acts and Rules, lack of opportunity for personal hearing.

Analysis:
The petitions sought to challenge the legality and validity of an Order-in-original dated 25.03.2022 and 2 Summary Orders passed by respondent No.3, alleging violations of the Central Goods and Services Tax Act, 2017, Central Goods and Services Tax Rules, 2017, Gujarat Goods and Services Tax Act, 2017, and Gujarat Goods and Services Tax Rules, 2017, as well as principles of natural justice. The petitioner, a unit manufacturing automobile components, exported goods under Letter of Undertaking without payment of GST, inadvertently misreporting export turnover in a GST return. Respondent No.3 raised queries, to which the petitioner responded, clarifying the error. Subsequently, respondent No.3 issued a demand notice for ITC along with interest and penalty, leading to the issuance of a show-cause notice and eventual passing of the impugned order without affording a personal hearing, as required by Section 75(4) of the CGST Act, 2017.

The High Court, after hearing both sides, noted that Section 75(4) mandates granting an opportunity of hearing when an adverse decision is contemplated, regardless of a formal request. The Department argued that since the proceedings were online and no hearing was requested, it was not necessary. However, the Court emphasized that personal hearing is essential in such cases. Consequently, solely due to the lack of a personal hearing, the Court quashed the impugned order and directed respondent No.3 to provide a personal hearing on 18.07.2022, allowing document submission by 13.07.2022. The Court stressed no adjournments should be sought, and this decision does not prejudice the final outcome. Both petitions were disposed of accordingly, with direct service permitted.

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