GST authorities' order set aside for denying personal hearing to trader in fraud case under CGST Sections 75(4) and 75(5)

Delhi HC set aside an order passed by GST authorities against a trader for alleged fraudulent transactions involving non-existent entities. The court found clear violation of natural justice principles as petitioner was denied personal hearing before the adverse order, despite statutory requirements under CGST Act Sections 75(4) and 75(5). Authorities incorrectly considered telephonic conversation and representative's visit as adequate hearing. The adjudicating officer appeared rushed to conclude proceedings before financial year-end, passing order immediately after reply filing. Court exercised discretionary jurisdiction under Article 226 despite availability of alternate remedy, remanded matter for fresh adjudication with proper hearing opportunity, and imposed Rs.5,000 costs on Commissioner for improper conduct and wasting judicial time.

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Issues Involved
1. Violation of Principles of Natural Justice
2. Opportunity of Personal Hearing
3. Adherence to Statutory Provisions
4. Availability of Alternate Remedy

Summary

Violation of Principles of Natural Justice
The petitioner challenged the demand order dated 25.03.2021, issued under Section 74(9) of the CGST Act, on the ground that it was passed in gross violation of the principles of natural justice. The petitioner argued that no opportunity for a personal hearing was provided before the order was passed, which is a fundamental requirement under the law.

Opportunity of Personal Hearing
The petitioner emphasized that the impugned order was passed without granting any personal hearing, despite the petitioner's explicit request for the same. The petitioner relied on various judgments and a circular dated 10.03.2017, which mandates at least three opportunities for personal hearing. The respondent countered that the principles of natural justice are not a rule of thumb and that the telephonic conversations and visits by the petitioner's representatives were equivalent to a personal hearing.

Adherence to Statutory Provisions
The court noted that Section 75(4) and 75(5) of the CGST Act explicitly require an opportunity of hearing to be granted when requested in writing or when an adverse decision is contemplated. The court found that the respondent's actions were contrary to these statutory provisions. The court also observed that the respondent's claim that telephonic conversations and visits by representatives amounted to a personal hearing was untenable.

Availability of Alternate Remedy
The respondent argued that the petitioner had an alternate remedy to challenge the impugned order by filing an appeal. However, the court held that the existence of an alternate remedy does not oust the jurisdiction of the High Court, especially in cases involving violations of principles of natural justice. The court cited various precedents to support this view.

Conclusion
The court concluded that the impugned order was passed in clear violation of Section 75(4) and Section 75(5) of the CGST Act and the principles of natural justice. The court set aside the demand notice dated 25.03.2021 and remanded the matter for a fresh order after affording the petitioner a due opportunity to be heard. Additionally, the court imposed a cost of Rs. 5,000 on the respondent for wasting judicial time and causing harassment to the litigant.

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