GST officer must provide personal hearing opportunity before demanding excess Input Tax Credit under Section 74

MP HC set aside GST proceedings demanding excess Input Tax Credit with interest and penalty under Section 74. The court found violation of natural justice principles as petitioners were denied personal hearing opportunity before adverse decision. Despite petitioners not specifically requesting hearing, court held it was mandatory to provide opportunity when adverse action was contemplated. Proceedings after show cause notice reply stage were quashed, directing fresh hearing by different officer than one who issued notice.

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Issues involved: Violation of principles of natural justice in passing an order under Section 74 of the CGST Act/MPGST Act without considering petitioner's submissions or providing an opportunity of hearing.

Summary of Judgment:

Issue 1: Violation of Principles of Natural Justice

The petitioner challenged an adjudication order under Article 226 of the Constitution, where a demand for excess Input Tax Credit (ITC) was raised without considering the petitioner's submissions or providing a hearing. The order was passed under Section 74 of the CGST Act/MPGST Act, which mandates considering the representation made by the assessee before determining tax, interest, and penalty. The petitioner argued that the order disregarded the principles of natural justice by not providing an opportunity of being heard, as required by Section 75(4) of the Acts. The court noted that the provision mandates granting an opportunity of hearing where an adverse decision is contemplated, regardless of a specific request for a personal hearing. The court emphasized that the word 'or' in the statute indicates that hearing must be granted even if no specific request is made but an adverse decision is anticipated. The court held that the absence of a personal hearing in the present case violated the principles of natural justice and statutory requirements, setting aside the proceedings and directing a re-hearing by a different officer.

Conclusion

The court found that the impugned proceedings were flawed as they did not provide the petitioner with an opportunity of personal hearing despite an adverse decision being contemplated. The court set aside the proceedings and directed a re-hearing by a different officer, emphasizing the importance of adhering to principles of natural justice and statutory requirements in such cases. The court clarified that its decision did not express any opinion on the merits of the case, disposing of both writ petitions accordingly.

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