2023 (1) TMI 916 - HC - GST

Ex-parte GST assessment of Rs. 2.40 crores set aside for denying personal hearing and violating natural justice principles

Gujarat HC set aside an ex-parte assessment order in Form GST DRC-07 imposing tax, interest and penalty of Rs. 2.40 crores. The court held that SCN was ... Opportunity of personal hearing - Section 75(4) of the CGST Act, 2017 - ex-parte order - quash and remand for fresh adjudication - service by electronic portal and requirement of physical serviceOpportunity of personal hearing - Section 75(4) of the CGST Act, 2017 - ex-parte order - quash and remand for fresh adjudication - Whether the ex-parte assessment order in Form GST DRC-07 dated 14.04.2022 is vitiated for want of personal hearing as required by Section 75(4) and liable to be quashed and remanded for fresh adjudication. - HELD THAT: - The Court observed that personal hearing had not been granted and the order in Form GST DRC-07 was passed ex-parte. Reliance was placed on earlier decisions of this Court interpreting Section 75(4), which mandates that an opportunity of hearing must be granted where an adverse decision is contemplated, even if no written request for hearing is made by the taxpayer. The Department's reliance on online service through the portal did not cure the absence of personal hearing. In view of the settled principle that absence of the mandatory personal hearing vitiates an adverse adjudicatory order, the impugned order was quashed. The matter was remitted to the authority to proceed from the stage where proceedings had been left, after effecting service physically (in addition to portal service) and affording a reasonable opportunity of hearing to the petitioner; directions were given that documents, if any, be furnished within specified time and that the authority decide the matter in accordance with law. [Paras 4, 5, 6, 7]Impugned ex-parte order in Form GST DRC-07 dated 14.04.2022 quashed; matter remitted for fresh adjudication after physical service and affording opportunity of personal hearing, with liberty to the respondents to proceed from the stage where proceedings stood.Final Conclusion: Writ petition allowed; impugned assessment order set aside for failure to provide the mandatory personal hearing under Section 75(4) and remitted for fresh consideration after physical service and affording reasonable opportunity of hearing. Issues:Challenge to ex-parte order in FORM GST DRC-07 for not following principles of natural justice.Analysis:The petition sought to set aside an ex-parte order passed by the respondent without granting an opportunity for personal hearing, as required under Section 75(4) of the CGST/SGST Act, 2017. The petitioner, a manufacturer of polyester yarn, received a show cause notice in Form GST DRC-01 but was not served a hard copy. The order in Form GST DRC-07 was passed before the petitioner could respond, leading to the challenge in court. The petitioner relied on various court decisions emphasizing the importance of personal hearing and interpretation of Section 75(4) of the Act.Court Proceedings:The Court noted that the personal hearing was not granted in this case, resulting in an ex-parte order imposing a substantial amount of tax, interest, and penalty. Citing previous judgments like Graziano Trasmissioni India Pvt. Ltd. vs. State of Gujarat and Alkem Laboratories Ltd. vs. Union of India, the Court emphasized the necessity of providing a personal hearing even without a specific request from the concerned party when an adverse decision is anticipated.Legal Interpretation:Section 75(4) of the CGST Act, 2017 mandates the grant of an opportunity of hearing when any adverse decision is contemplated, irrespective of a formal request. The Court highlighted that the online mode of proceedings chosen by the petitioners did not absolve the authorities from providing a personal hearing. Therefore, the Court quashed the impugned order based solely on the absence of a personal hearing opportunity, directing a fresh consideration with full participation of the parties.Judgment:Consequently, the petition was allowed, setting aside the assessment order and all related proceedings. The respondent was directed to initiate proceedings afresh, ensuring a reasonable opportunity for the petitioner to be heard, including physical interaction. The Court also mandated physical service in addition to the online portal for effective communication. The petition was disposed of accordingly, emphasizing the importance of natural justice in administrative proceedings.