GST excess input tax credit demand via DRC-07 orders set aside for missing mandatory s.75(4) personal hearing

Assessment orders under s. 73 r/w s. 75(4) of the GST Act and consequential summary orders in Form GST DRC-07 raising demand of excess ITC with interest and penalty were challenged as violative of natural justice for want of personal hearing. The HC held that s. 75(4) mandates a personal hearing not only on a specific request but also where an adverse decision is contemplated; the statutory "or" makes hearing obligatory even absent a request. As no hearing was granted, the decision-making process was vitiated and contrary to s. 75(4) and natural justice. Consequently, proceedings post-reply stage were set aside, and the authority was directed to grant hearing through an officer other than the one who issued the SCN.

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Issues involved:
The issues involved in the judgment are violation of principles of natural justice, failure to provide opportunity of personal hearing, and non-adherence to statutory provisions under the Madhya Pradesh Goods & Service Tax Act, 2017.

Violation of Principles of Natural Justice:
The petitioner challenged a summary order issued under the Madhya Pradesh Goods & Service Tax Act, 2017, alleging that it was passed in ex-parte proceedings without providing an opportunity for personal hearing. The petitioner argued that this violated settled principles of natural justice and fair hearing. The order was also criticized for failing to adhere to Rule 142(1A) of the CGST Rules, 2017. The court noted that the petitioner was not afforded the opportunity of personal hearing as required by Section 73(9) of the Act, which mandates considering representations made by the Assessee before determining tax, interest, and penalty.

Opportunity of Hearing Mandate:
The court examined Section 75(4) of the CGST Act/MPGST Act, which stipulates that an opportunity of hearing must be granted before passing an adverse order against the Assessee. The petitioner's counsel argued that this provision is mandatory and must be fulfilled even if no specific request for a personal hearing is made. The court cited relevant case law to support the importance of providing a fair hearing, emphasizing the distinction between 'opportunity of hearing' and 'personal hearing'.

Statutory Interpretation and Decision:
The court analyzed the language of sub-section 4 of Section 75 of the Act, emphasizing the requirement to grant an opportunity of hearing in cases where an adverse decision is contemplated, regardless of a specific request. The court rejected the state's argument that 'opportunity of hearing' did not include 'personal hearing', noting that different stages are envisioned for personal hearing in the statutory form. Consequently, the court found that the decision-making process was flawed due to the lack of personal hearing, and set aside the impugned proceedings, directing the respondents to provide the petitioners with a proper opportunity of hearing.

Disposition of Writ Petitions:
Both writ petitions were disposed of, with the court setting aside the proceedings after the show cause notices and ordering a reevaluation with proper opportunity of hearing. The court clarified that no opinion on the merits of the case was expressed in the judgment, ensuring fairness and adherence to legal procedures.

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