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 ... Service of SCN - SCN served on portal and no hard copy served - Validity of ex-parte order passed without following principles of Natural Justice - HELD THAT:- It is not disputed that the personal hearing had not been granted in the instant case. It is an ex-parte order in Form GST DRC-07 passed on 14.04.2022 by making the addition of huge amount of tax, interest and penalty of Rs. 2.40 crores (rounded off). The decision of this Court in case of GRAZIANO TRASMISSIONI INDIA PRIVATE LIMITED VERSUS STATE OF GUJARAT [2022 (7) TMI 752 - GUJARAT HIGH COURT] and other decisions will need to come to the rescue of the petitioner which insist on providing the opportunity of personal hearing when any adverse decision is contemplated, even without any request for personal hearing on the part of the party concerned. The impugned order of assessment with all consequential proceedings are set aside - petition allowed. 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.