Rejection of Advance Ruling Application Without Hearing Violates Natural Justice Under Section 98(2)

The HC held that rejection of the Advance Ruling application without providing the petitioner an opportunity to show cause violated natural justice. The court found that the hearing under Section 98(2) cannot be a mere formality and the petitioner should have been informed that the application could be rejected due to the contractual period's expiry. The respondent's order rejecting the application without admission was quashed, and the application was restored for reconsideration with due opportunity to the petitioner to present additional pleas. The petition was allowed in part, emphasizing the necessity of a fair hearing before rejecting such applications.

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Issues involved:
The rejection of the petitioner's application for advance ruling under Section 98(2) of the Central Goods and Services Tax Act, 2017 and Karnataka Goods and Services Tax Act, 2017 without due opportunity to show cause against the reason assigned.

Issue 1: Rejection of Application without Opportunity for Hearing
The petitioner's grievance is that their application was rejected without being admitted for detailed hearing, depriving them of the opportunity to show cause against the reason assigned. The respondent's order under Section 98(2) of the CGST Act/KGST Act was challenged on the grounds of denial of opportunity of hearing as per the principles of natural justice.

Details:
- The respondent rejected the application, stating that it was filed after the expiry of the contractual period for construction and maintenance work.
- The petitioner argued that they were not informed that the application could be rejected without admission on this ground, rendering the opportunity of hearing a mere formality.
- The Court held that the opportunity of hearing cannot be an empty formality and that the petitioner should have been informed about the possibility of rejection based on the expired contractual period.
- The Court quashed the respondent's order and restored the application for reconsideration, allowing the petitioner to file additional plea upon receiving notice of further hearing.

Issue 2: Jurisdiction of Division Bench
The question arose whether every challenge to an advance ruling should be placed before a Division Bench of the High Court. Reference was made to a previous case where it was held that challenges to advance rulings should be heard directly by a Division Bench to ensure expeditious resolution.

Details:
- The Court considered the question of whether petitions against orders under Section 98(2) or 98(4) of the CGST Act/KGST Act should be heard by a Division Bench.
- While acknowledging the importance of expeditious resolution, the Court decided that in this case, interference with the Advance Ruling Authority's order under Section 98(2) did not necessitate placement before a Division Bench.
- The Court allowed the petition in part, emphasizing the need for due opportunity for the petitioner in the reconsideration of the application.

This judgment highlights the significance of providing a fair opportunity for parties to be heard in matters of advance rulings under the GST Acts, ensuring that the principles of natural justice are upheld throughout the adjudicative process.

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