Validity of notice in GST assessment where denial of personal hearing violated natural justice, order remitted for fresh notice and hearing.

Validity of a notice in a tax assessment was examined where the assessee was denied oral personal hearing, breaching principles of natural justice. Relying on prior coordinate-bench precedent interpreting statutory procedure, the court held that the assessing authority must mandatorily afford personal hearing before passing an adverse assessment; an election by the assessee against hearing was held legally immaterial. Because the assessment raised an adverse tax demand and no hearing was granted, the order was set aside and the matter remitted for issuance of fresh notice and opportunity of personal hearing, enabling a reasoned reconsideration.

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Issues involved:
Challenge to order passed by Deputy Commissioner for excess tax demand; Denial of opportunity of oral hearing before Assessing Authority.

Issue 1: Challenge to order passed by Deputy Commissioner for excess tax demand
The petitioner challenged the order passed by the Deputy Commissioner, State Tax, Lucknow for the tax period 2021-22, raising a demand in excess of Rs. 4,51,52,992. The main contention was that the petitioner was denied the opportunity of oral hearing before the Assessing Authority, as the notice issued did not provide for a personal hearing. The petitioner argued that as per Section 75(4) of the U.P. GST Act, 2017, the Assessing Authority was obligated to afford an opportunity of personal hearing before passing an adverse assessment order.

Issue 2: Denial of opportunity of oral hearing before Assessing Authority
The petitioner contended that the Assessing Authority's failure to provide an opportunity of personal hearing was in violation of the law. Citing a previous decision by a coordinate bench of the Court and a judgment of the Gujarat High Court, the petitioner argued that the principle of natural justice required the authority to grant a personal hearing, especially in cases involving substantial tax liabilities. The Court agreed with the petitioner's argument, emphasizing that the Assessing Authority must ensure that such opportunities are granted in reality, not just in formality. The Court held that providing a personal hearing not only upholds the principles of natural justice but also allows for a more informed and just decision-making process.

Conclusion:
The Court allowed the writ petition, setting aside the impugned order dated 26.07.2021 and remitting the matter back to the Deputy Commissioner, State Tax, Lucknow. The Deputy Commissioner was directed to issue a fresh notice to the petitioner within two weeks, ensuring that the petitioner is given a proper opportunity for a personal hearing before any further proceedings take place.

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