2024 (9) TMI 1684 - HC - GST

Assessment and penalty orders quashed for denying personal hearing opportunity under Section 75(4) CGST Act

The AP HC set aside assessment and penalty orders under CGST Act, 2017 for violating natural justice principles. The court held that while Section 67 ... Previous authorization for inspection under Section 67 - assessment of un-registered persons under Section 63 - opportunity of personal hearing under Section 75(4) - adjournment limit under Section 75(5) as an outer limitPrevious authorization for inspection under Section 67 - Validity of inspection where prior authorization under Section 67 was alleged to be absent. - HELD THAT: - The Court examined Section 67 which requires previous authorization from the competent authority before an officer may inspect premises or conduct an audit. The record showed that the requisite previous authorization had been obtained on 05.11.2019. Consequently, the inspection carried out on 07.11.2019 was not vitiated for want of prior authorization. [Paras 6]Inspection was valid as previous authorization under Section 67 had been obtained.Assessment of un-registered persons under Section 63 - proper officer - Whether a separate prior authorization was required for the officer who conducted assessment of an un-registered person arising from such inspection. - HELD THAT: - Section 63 empowers the 'proper officer' to assess un-registered persons to the best of his judgment and contains no requirement for prior authorization when the assessment is carried out by the proper officer. The term 'proper officer' is an officer to whom functions are assigned by the Commissioner and territorial limits are so assigned. The material showed that the officer who conducted the proceedings was the territorial assessing authority for the area at the relevant time (Adanki circle), and thus no separate authorization under Section 63 was required for the assessment by the proper officer. [Paras 8, 9]No separate prior authorization was required for assessment under Section 63 when undertaken by the proper territorial assessing officer.Adjournment limit under Section 75(5) as an outer limit - Whether Section 75(5) mandates granting three adjournments before passing an order. - HELD THAT: - Section 75(5) provides that no adjournment shall be granted for more than three times. The Court construed this language as placing an outer limit on adjournments that may be granted, and not as prescribing a minimum number of adjournments that must be granted before an order can be passed. The petitioner had not shown any record of seeking multiple adjournments beyond the initial request. [Paras 10, 11, 12]Section 75(5) does not require three adjournments to be granted before an order may be passed; it only caps the maximum number of adjournments.Opportunity of personal hearing under Section 75(4) - Whether the assessing authority was obliged to grant a personal hearing before passing the assessment and penalty orders. - HELD THAT: - Section 75(4) mandates that an opportunity of hearing shall be granted where a request is received in writing or where any adverse decision is contemplated against the person chargeable with tax or penalty. The show-cause notice provided for filing written objections but did not grant a personal hearing, and an adverse decision was clearly contemplated. In these circumstances the Court found that a personal hearing ought to have been afforded before passing the orders. Having reached this conclusion, the Court set aside the assessment and penalty orders and directed that fresh proceedings may be undertaken after affording a personal hearing to the petitioner. [Paras 13, 14, 16]Assessment and penalty orders were set aside for want of required opportunity of personal hearing under Section 75(4); fresh proceedings may be conducted after granting personal hearing.Final Conclusion: The inspection was valid as prior authorization under Section 67 had been obtained and no separate authorization was required for assessment under Section 63 when conducted by the proper territorial officer; Section 75(5) limits adjournments but does not mandate three adjournments; however, because Section 75(4) required a personal hearing where an adverse decision was contemplated and no such hearing was granted, the assessment and penalty orders are set aside and the authorities are permitted to undertake fresh proceedings after affording a personal hearing to the petitioner. Issues:Challenge to assessment order and penalty order based on lack of adequate opportunity of hearing, requirement of three adjournments before passing orders, authorization for inspection and assessment proceedings, absence of DIN numbers on orders.Analysis:1. The petitioner challenged the assessment order and penalty order in two writ petitions, alleging inadequate opportunity of hearing and lack of adjournments as required by Section-75 of the CGST Act, 2017.2. The petitioner argued that the inspecting officer did not have proper authorization under Section-67 of the CGST Act, 2017 to conduct assessment proceedings. The petitioner contended that the assessing officer should have obtained authorization before passing the assessment order.3. The petitioner further raised a new ground regarding the absence of Document Identification Number (DIN) on the orders, citing a previous judgment. The petitioner argued that the absence of DIN numbers rendered the orders invalid.4. The Government Pleader countered the petitioner's contentions by explaining that Section-75 of the CGST Act, 2017 does not mandate three adjournments before passing orders, only limits the number of adjournments. The Pleader also clarified the requirements of authorization under Section-67 and the necessity of DIN numbers on orders for authentication purposes.5. The Court examined the provisions of Section-67 and Section-63 of the CGST Act, 2017 concerning authorization for inspection and assessment of unregistered persons. The Court found that the assessing officer had proper territorial jurisdiction and did not require additional authorization for assessment.6. Regarding the issue of adjournments, the Court noted that while Section-75 allows for adjournments, the petitioner did not seek further adjournments after the initial request. However, the Court emphasized the necessity of granting a personal hearing if an adverse decision is contemplated, which was lacking in this case.7. Consequently, the Court set aside the assessment and penalty orders, directing the respondents to conduct a fresh assessment proceeding after providing the petitioner with a personal hearing. The Court did not delve into the requirement of DIN numbers on orders due to the decision to set aside the orders.8. The Writ Petitions were disposed of without costs, with directions for a fresh assessment proceeding and personal hearing for the petitioner.