2024 (2) TMI 942 - HC - GST

Procedural Fairness Prevails: Tax Hearing Violation Nullifies Order, Mandates Fresh Proceedings Under Section 75(4)

M/s. Atlas Cycles Haryana Ltd. Versus State of U.P. and Another

HC found a procedural violation in tax proceedings where the petitioner was denied a mandatory personal hearing under section 75(4) of U.P. G.S.T. Act, ... Principles of natural justice - requirement of grant of an opportunity of personal hearing before any adverse decision is taken against any person - HELD THAT:- Upon service of notice the petitioner had been called to file its reply only. Non-compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate in the oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped - the rules of natural justice as are ingrained in the statute prescribe dual requirement. First with respect to submission of written reply and the second with respect to oral hearing. Failure to avail one opportunity may not lead to denial of the other. The two tests have to be satisfied independently. On merits, learned counsel for the petitioner further states that detailed reply was not required. The discrepancies in the returns as noticed by the adjudicating authority would have been clarified if opportunity of personal hearing had been granted. Thus, no useful purpose may be served in keeping this petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy. The order impugned has been passed contrary to the mandatory procedure. The deficiency of procedure is self-apparent and critical to the outcome of the proceedings - matter is remitted to the respondent No. 2 to pass a fresh order - petition allowed by way of remand. Issues involved:The primary issue in this case is the failure to grant the petitioner an opportunity of personal hearing as mandated by section 75(4) of the U.P. G.S.T. Act, 2017. Summary of Judgment:1. The court noted that the petitioner was not afforded any opportunity of personal hearing as required by law, despite receiving notices that did not propose to grant personal hearing.2. It was emphasized that even if the petitioner failed to submit a written reply to a show cause notice, they should still have the right to participate in an oral hearing to contest adverse conclusions.3. The court highlighted that the rules of natural justice embedded in the statute necessitate both written and oral opportunities for hearing, which must be satisfied independently.4. On the merits of the case, the petitioner's counsel argued that a detailed reply was not necessary, and any discrepancies could have been clarified during a personal hearing.5. The petitioner's failure to respond to the notice in a timely manner was attributed to the closure of their business operations since 2020.6. The court found that the impugned order was passed contrary to the mandatory procedure, and the deficiency in the procedure was critical to the outcome of the proceedings.7. Consequently, the court set aside the impugned order and remitted the matter to the respondent to pass a fresh order, directing the petitioner to file a final reply within two weeks and appear before the assessing authority on a specified date for further proceedings.8. The writ petition was allowed in favor of the petitioner.