2024 (3) TMI 784 - HC - GST

Taxpayer Wins Challenge: Procedural Fairness Mandates Fresh Assessment with Personal Hearing Under Section 74 of UP GST Act

M/s New Makhan Bhog Versus State Of Up And 2 Others

HC found a violation of natural justice in tax assessment under Section 74 of UP GST Act. The court quashed existing orders due to lack of personal ... Violation of principles of natural justice - order under Section 74 of the Act was passed without granting any opportunity of hearing to the petitioner - HELD THAT:- Upon an examination of the material on record, it is found that this will be an exercise in futility to grant time for filing the counter affidavit, as the point involved in this writ petition is only a point of law. Firstly, as held by this Court in M/S SHREE SAI PALACE VERSUS STATE OF U.P. AND OTHERS [2024 (3) TMI 49 - ALLAHABAD HIGH COURT] this Court has held that if an adverse order is passed under Section 74 of the Act, it is mandatory that opportunity of hearing be granted under Section 75(4) of the Act. On this very basis, the impugned orders do not have any legs to stand and are liable to be quashed and set aside. Furthermore, the judgement relied upon by the learned counsel for the petitioner in M/S DAIMOND (DIAMOND) STEEL VERSUS STATE OF UP AND 3 OTHERS [2023 (4) TMI 497 - ALLAHABAD HIGH COURT] is also buttressing the arguments of the petitioner that the adjudication carried out by the authorities below was nothing but a best judgement assessment, and accordingly, is against the principles as established in law. The impugned orders dated February 22, 2023 and January 16, 2023 are quashed and set aside with a direction upon the authorities to carry out de novo assessment, after granting opportunity of hearing to the petitioner, within a period of three months from date - petition allowed. Issues involved:The issues involved in the judgment are violation of principles of natural justice in passing orders under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017, and the necessity of providing an opportunity for personal hearing under Section 75(4) of the Act.Violation of Principles of Natural Justice:The writ petitioner challenged the order passed under Section 74 of the Act, contending that it was done without granting any opportunity of hearing, thus violating principles of natural justice. The petitioner relied on a judgment emphasizing that best judgment assessment cannot be used under Section 74 of the Act. The judgment highlighted that specific averments are required for invoking Section 74, and the assessment should not be based on guidelines issued by other authorities. The appellate authority's order was criticized for lacking reasons for assessing tax and penalty, leading to a conclusion that both the adjudicating and appellate authority's orders were not in line with the mandate of Section 74, warranting their quashing.Necessity of Providing Opportunity for Personal Hearing:The Court referenced a previous case to establish that when an adverse order is passed under Section 74 of the Act, it is mandatory to grant an opportunity of hearing under Section 75(4) of the Act. The judgment emphasized the significance of the word 'or' in Section 75(4), indicating the necessity of providing a personal hearing in two distinct scenarios: upon application by the individual subject to penalty or tax imposition, or in the event of contemplation of an adverse order. Personal hearing was deemed crucial for procedural fairness and natural justice, ensuring individuals can present their case and respond to allegations before any final determination is made regarding tax or penalty imposition.Conclusion:The Court quashed and set aside the impugned orders dated February 22, 2023, and January 16, 2023, directing the authorities to conduct a fresh assessment after granting the petitioner an opportunity of hearing within three months. The writ petition was allowed without any costs.