Construction Company Wins Challenge Against Tax Order, Securing Right to Personal Hearing Under CGST Section 75(4)

The HC quashed an order by tax authorities against a construction company for violating Section 75(4) of CGST Act and natural justice principles. The court found the order was issued without a mandatory personal hearing, despite revealing a tax liability of Rs. 20.02 crore. The judgment directed authorities to provide a personal hearing and issue a revised order within four weeks, emphasizing procedural fairness in tax proceedings.

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Issues:
The issues involved in the judgment are quashing of an Order dated 8th September 2022 passed by Respondent No. 3 on the ground of being contrary to the provisions of Section 75(4) of the Central Goods and Services Tax Act, 2017 and violation of the principles of natural justice.

Details of the Judgment:

Issue 1: Quashing of Order
The Petitioner, engaged in construction and sale of flats, sought to quash an Order dated 8th September 2022 passed by Respondent No. 3, alleging it was contrary to Section 75(4) of the CGST Act and violated natural justice principles. The audit findings revealed tax liability on flats transferred to Slum Dwellers, leading to a Show Cause Notice for unpaid CGST/MGST. Despite the Petitioner's replies, the Order required payment of Rs. 20,02,16,288. The Petitioner contended the Order was passed without a personal hearing, breaching Section 75(4) and natural justice.

Issue 2: Legal Interpretation
Section 75(4) mandates a personal hearing when an adverse decision is contemplated, even if not requested by the person chargeable. The Court held that the absence of a request for a personal hearing does not absolve the Department from granting one when an adverse decision is anticipated. The Order's issuance without a personal hearing was deemed a violation of natural justice and Section 75(4) of the CGST Act.

Issue 3: Judicial Precedents
The Court referenced prior decisions, including Kuehne Nagel Private Limited Vs. The State of Maharashtra & Ors. and Hydro Pneumatic Accessories India Pvt. Ltd. Vs. The Assistant Commissioner of State Tax, emphasizing the necessity of a personal hearing before adverse decisions. These cases supported the view that a personal hearing is mandatory, regardless of whether requested, when an adverse decision is imminent.

Conclusion
The Court ruled in favor of the Petitioner, quashing the Order and directing Respondent No. 3 to provide a personal hearing and issue a new Order within four weeks. The judgment highlighted the importance of adhering to procedural fairness and statutory requirements, emphasizing the right to a personal hearing even in the absence of a specific request.

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