Tax Demand Order Quashed Due to Procedural Flaws, Petitioner's Right to Hearing Upheld Under Natural Justice Principles

HC found procedural irregularities in tax demand order. Violation of natural justice principles occurred as petitioner was denied personal hearing despite show cause notice. Court quashed the impugned order and directed respondent to issue fresh order within six weeks, ensuring petitioner's opportunity to be heard before confirming any tax demand.

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Issues involved: Challenge to impugned order for violation of principles of natural justice, denial of Input Tax Credit, confirmation of demand without personal hearing.

Violation of Principles of Natural Justice:
The petitioner challenged the impugned order for being passed in violation of principles of natural justice, as it concluded the proceedings without the petitioner participating in the personal hearing, despite a Show Cause Notice being issued earlier. The respondent defended by stating that notices were duly served, including a notice of personal hearing, and since the petitioner failed to respond or appear, a further notice was issued. The petitioner argued that without being given an opportunity to be heard, confirming the demand was unjustifiable. The Court observed that the impugned order confirming the demand without the petitioner's participation in the hearing was not sustainable. The Court emphasized the importance of providing opportunities for a personal hearing before confirming demands under the GST law.

Denial of Input Tax Credit:
The issue in the Show Cause Notice pertained to the denial of Input Tax Credit availed based on invoices from a dealer whose registration was canceled for facilitating illegal credit availing. The petitioner contended that the dealer had discharged the tax liability on the invoices issued, and therefore, the credit should not be denied. The Court noted the arguments but focused on the procedural aspect of ensuring the petitioner's right to a personal hearing before confirming any demand.

Confirmation of Demand without Personal Hearing:
The Court referred to a Supreme Court decision highlighting the importance of following principles of natural justice and providing personal hearings before confirming demands. It stated that diluting such safeguards under the GST law would set an unhealthy trend and confirmed demands without giving a personal hearing would be unjust. Consequently, the Court quashed the impugned order and remitted the case back to the respondent for a fresh order to be passed within six weeks, ensuring the petitioner is heard before any decision is made. The Writ Petition was disposed of with these observations, emphasizing the need for procedural fairness in such matters.

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