GST officer's Input Tax Credit denial order quashed for violating natural justice principles requiring personal hearing

Gujarat HC quashed an order regarding Input Tax Credit discrepancies for FY 2018-19 where the petitioner wrongfully claimed differential credit. The court found that the impugned order dated 7.4.2022 and consequential letters were passed without providing the petitioner an opportunity for personal hearing, violating principles of natural justice. The HC set aside the order and directed the competent authority to provide personal hearing within three weeks and pass fresh orders within two weeks thereafter. The petition was allowed solely on grounds of procedural non-compliance.

---

---

Issues:
1. Challenge to impugned order under GST Act for non-compliance with principles of natural justice.
2. Allegation of non-consideration of reply and supporting documents by revenue authorities.
3. Request for quashing and setting aside of impugned order and recovery proceedings.
4. Interpretation of Section 75(4) and (5) of the CGST Act regarding opportunity of hearing.
5. Decision based on the case law of M/s. Alkem Laboratories Ltd. Vs. Union of India.

Analysis:

Issue 1: Challenge to impugned order under GST Act for non-compliance with principles of natural justice.
The petitioner approached the court seeking relief under Article 226 of the Constitution of India, challenging the impugned order dated 07.04.2022 passed by Respondent No.2. The petitioner contended that the impugned order was against the principles of natural justice as the petitioner was not granted any personal opportunity of hearing before the adverse order was passed. The petitioner sought the quashing and setting aside of the impugned order and requested for de novo adjudication.

Issue 2: Allegation of non-consideration of reply and supporting documents by revenue authorities.
The petitioner submitted a detailed reply along with necessary supporting documents in response to the show cause notice. However, the revenue authorities, in passing the impugned order, allegedly did not take into consideration the reply and supporting documents filed by the petitioner. The petitioner argued that the impugned order was a non-speaking order and lacked reasons or findings, indicating arbitrariness.

Issue 3: Request for quashing and setting aside of impugned order and recovery proceedings.
The petitioner urged the Court to quash and set aside the impugned order dated 07.04.2022 and the consequential recovery proceedings initiated by Respondent No.2. The petitioner sought a fresh adjudication of the matter, emphasizing the need for compliance with principles of natural justice and a fair hearing.

Issue 4: Interpretation of Section 75(4) and (5) of the CGST Act regarding opportunity of hearing.
The Court referred to Section 75(4) and (5) of the CGST Act, highlighting the requirement to grant an opportunity of hearing to the person chargeable with tax or penalty before passing an adverse decision. In the absence of such an opportunity, the Court noted that the impugned order deserved to be quashed, citing the case law precedent of M/s. Alkem Laboratories Ltd. Vs. Union of India.

Issue 5: Decision based on the case law of M/s. Alkem Laboratories Ltd. Vs. Union of India.
The Court, after considering the submissions of both parties, acknowledged that the petitioner was not granted a personal hearing as mandated by Section 75(4) of the GST Act. Citing the precedent set in the case of M/s. Alkem Laboratories Ltd. Vs. Union of India, the Court quashed and set aside the impugned order dated 07.04.2022 and the consequential recovery proceedings. The competent authority was directed to afford the petitioner a personal hearing and pass fresh orders within a specified timeline, emphasizing compliance with principles of natural justice.

This comprehensive analysis highlights the key legal issues, arguments presented by both parties, relevant statutory provisions, and the Court's decision based on principles of natural justice and case law precedent.

---