Adverse GST assessment quashed for breach of natural justice; Section 75(4) requires personal hearing before imposing liability

HC held the adverse assessment order unlawful for breach of natural justice, finding the Assessing Authority was obliged under Section 75(4), U.P. GST Act, 2017 to afford a personal hearing before imposing liability. The petitioner's marking "No" to a hearing request did not cure the defect; a minimal, real opportunity to be heard is mandatory, especially where heavy civil liability is at stake. The matter was remitted to the Deputy Commissioner, State Tax, Raebareli to issue a fresh notice within two weeks and afford hearing before passing a fresh, reasoned assessment order.

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ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the petitioner was denied a fair opportunity of personal hearing before the Assessing Authority, as required under Section 75(4) of the U.P. GST Act, 2017, and whether this denial invalidates the adverse assessment order issued against the petitioner.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework is Section 75(4) of the U.P. GST Act, 2017, which mandates that an opportunity for a hearing must be granted when a request is received in writing from the person chargeable with tax or penalty, or when any adverse decision is contemplated against such person. The Court referenced the precedent set in Bharat Mint & Allied Chemicals Vs. Commissioner Commercial Tax, which emphasized the mandatory nature of providing a personal hearing before passing an adverse assessment order.

Court's Interpretation and Reasoning

The Court interpreted Section 75(4) to mean that it is obligatory for the Assessing Authority to offer a personal hearing to the assessee before issuing an adverse order. The Court agreed with the interpretation in Bharat Mint & Allied Chemicals, stating that the obligation to provide a hearing is not contingent upon the assessee's request. The Court emphasized that the principle of natural justice requires that an opportunity for a hearing be provided to ensure fairness and transparency in the assessment process.

Key Evidence and Findings

The key evidence in this case was the notice issued to the petitioner, which lacked any details regarding the date, time, and venue for a personal hearing, as indicated by the "NA" entries in the relevant columns. This omission was central to the petitioner's argument that they were denied an opportunity for oral representation, which is a critical aspect of natural justice.

Application of Law to Facts

The Court applied the legal principles from Section 75(4) and the Bharat Mint & Allied Chemicals case to the facts, concluding that the absence of a scheduled personal hearing in the notice constituted a denial of the mandatory opportunity for a hearing. This procedural lapse rendered the assessment order invalid as it contravened the statutory requirement and principles of natural justice.

Treatment of Competing Arguments

The petitioner argued that the lack of a personal hearing violated their rights under the U.P. GST Act and the principles of natural justice. The respondent did not provide a counter-argument that effectively addressed the statutory requirement for a hearing. The Court found the petitioner's arguments compelling and consistent with established legal principles, leading to the conclusion that the assessment order was procedurally flawed.

Conclusions

The Court concluded that the petitioner was unjustly denied a personal hearing, which is a fundamental procedural right under the U.P. GST Act. Consequently, the assessment order was set aside, and the matter was remitted for reconsideration with proper observance of the hearing requirement.

SIGNIFICANT HOLDINGS

The Court held that the opportunity for a personal hearing is a mandatory procedural step under Section 75(4) of the U.P. GST Act, 2017, especially when an adverse decision is contemplated. The Court stated: "An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person." This holding reinforces the principle that procedural fairness and the right to be heard are integral to the assessment process.

The final determination was that the impugned assessment order dated 26.12.2022 was set aside due to the procedural violation, and the matter was remitted to the Deputy Commissioner, State Tax, to issue a fresh notice and provide a proper opportunity for a hearing.

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