2023 (10) TMI 943 - HC - GST

Tax Demand Order Quashed: Procedural Fairness Violated, Deputy Commissioner Directed to Provide Proper Hearing Under Section 75(4)

HC allowed the writ petition challenging a tax demand order. The court found that the Deputy Commissioner violated procedural fairness by denying the ... Mandatory personal hearing under Section 75(4) of the U.P. GST Act, 2017 - opportunity of hearing - principles of natural justice - adverse assessment and requirement of audi alteram partem - remand for fresh hearingMandatory personal hearing under Section 75(4) of the U.P. GST Act, 2017 - opportunity of hearing - adverse assessment and requirement of audi alteram partem - Whether the Assessing Authority was obliged to grant an opportunity of personal hearing before passing an adverse assessment order against the petitioner for the tax period 2021-22, notwithstanding any indication by the assessee to the contrary on the notice form. - HELD THAT: - Section 75(4) requires that an opportunity of hearing be granted where an adverse decision is contemplated. The Court agreed with the coordinate bench decision in Bharat Mint & Allied Chemicals that the obligation to afford personal hearing is mandatory and does not depend upon a prior written request by the person chargeable with tax. Consequently, an assessee's purported signification of 'No' in the column relating to choice of personal hearing does not extinguish the statutory duty of the Assessing Authority to provide an opportunity of hearing before recording an adverse finding. In the context of an assessment creating substantial civil liability, affording a real and minimal opportunity of hearing is required by the principles of natural justice; it allows the authority to hear explanations, pass a reasoned order and facilitates proper appellate scrutiny if required. Having found that no personal hearing was afforded prior to issuing the impugned order dated 05.07.2023, the Court set aside that order and directed remand for fresh notice and hearing so that the assessee's explanations may be considered before any demand is finalized. [Paras 6, 7, 8, 9]Impugned assessment order set aside; matter remitted to Deputy Commissioner to issue fresh notice and afford personal hearing, with proceedings to be completed expeditiously.Final Conclusion: Writ petition allowed. The assessment order dated 05.07.2023 is quashed and the matter remitted for fresh notice and personal hearing; the petitioner to appear on the next date fixed and proceedings to be concluded expeditiously. Issues: Challenge to order passed by Deputy Commissioner for excess tax demand; Denial of opportunity of oral hearing to petitioner.Challenge to Order Passed by Deputy Commissioner:The petitioner challenged the order passed by the Deputy Commissioner, State Tax, Lucknow, raising a demand in excess of Rs. 65,284,344 for the tax period 2021-22. The main contention was that the petitioner was denied the opportunity of oral hearing before the Assessing Authority, which is a violation of Section 75(4) of the U.P. GST Act, 2017. The petitioner argued that the assessment order was adverse and raised a disputed tax demand of about Rs. 19 lacs without affording the necessary opportunity of hearing as mandated by law.Denial of Opportunity of Oral Hearing:The petitioner's counsel pointed out that the notice issued to the petitioner on 20.03.2023 did not provide any opportunity for a personal hearing, as indicated by 'NA' against the relevant columns. Citing the interpretation of Section 75(4) of the Act by a coordinate bench in a previous case, it was argued that the Assessing Authority was obligated to grant a personal hearing before making an adverse assessment order. The court concurred with this view, emphasizing that the petitioner should not have been required to request a personal hearing and that it was mandatory for the Assessing Authority to provide such an opportunity.The court stressed the importance of affording a genuine opportunity of hearing, especially in cases involving significant civil liabilities. Upholding the principles of natural justice, the court held that the authorities must always ensure the provision of such an opportunity to the concerned party. It was noted that the impugned order was passed without granting the petitioner a proper hearing, which could lead to ambiguity in the assessee's stand. Providing a fair hearing not only upholds natural justice but also enables the authority to pass a well-reasoned order, serving the interests of justice and facilitating better outcomes at subsequent stages, including appeals.In conclusion, the writ petition was allowed, setting aside the order dated 05.07.2023. The matter was remitted back to the Deputy Commissioner, State Tax, Lucknow, with directions to issue a fresh notice to the petitioner within two weeks, ensuring that the petitioner is given a proper opportunity for a hearing before concluding the proceedings promptly.