2025 (4) TMI 1718 - HC - GST

Assessment orders set aside for denying personal hearing; proceedings must afford opportunity before adverse action

The HC held that the impugned assessment orders violated principles of natural justice because the petitioner was not afforded any personal hearing: the ... Principles of natural justice - impugned order passed without providing any opportunity of hearing to the petitioner and the same has been passed without fixing any date or time and personal hearing or venue - non-compliance in filing Form GSTR - 3B - HELD THAT:- It is not in dispute that the notice was issued on 05.11.2020, but the record shows that in the column with regard to date of personal hearing, time of personal hearing and venue of personal hearing, “N.A.” was mentioned. This Court in Bharat Mint & Allied Chemicals Vs. Commissioner Commercial Tax & 2 Ors. [2022 (3) TMI 492 - ALLAHABAD HIGH COURT], has held that the Assessing Authority was bound to afford opportunity of personal hearing to the petitioner before passing an adverse assessment order. In absence of opportunity of hearing afforded, the same is contrary to the law declared by this Court in Bharat Mint & Allied Chemicals. The impugned orders passed in these writ petitions are hereby set aside - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessing authority is obliged to afford an opportunity of personal hearing before passing an adverse assessment order under the CGST Act where the notice records 'N.A.' in the columns for date, time and venue of personal hearing. 2. Whether omission to provide a personal hearing (or fixing date/time/venue) in the notice contravenes the requirements of natural justice and specific statutory provisions (notably section 74(9)/section 75(4) or equivalent provisions relating to opportunity of hearing) such that the assessment/appeal orders must be set aside. 3. Whether appellate authority erred in dismissing an appeal without recognizing that the assessing authority had not afforded a real opportunity of hearing prior to passing the assessment order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Obligation to afford personal hearing when notice shows 'N.A.' for personal hearing particulars Legal framework: The statutory scheme contemplates that an officer must take into account representations made by the person chargeable with tax and that an opportunity of hearing shall be granted where an adverse decision is contemplated (statutory provisions invoked: section 74(9) and provision analogous to section 75(4) of the CGST Act). Precedent Treatment: The Court followed earlier decisions of this Court holding that the assessing authority is bound to afford an opportunity of personal hearing before passing an adverse assessment order; reliance was also placed on a decision of the Gujarat High Court addressing similar facts. Interpretation and reasoning: A mere endorsement of 'N.A.' against columns for date/time/venue of hearing, thereby denying a tangible opportunity for oral/personal hearing, does not satisfy the statutory mandate. The obligation to afford an opportunity of hearing is mandatory when an adverse order is contemplated and is not made contingent upon a written request from the assessee. Ratio vs. Obiter: Ratio - It is mandatory for the assessing authority to afford an opportunity of personal hearing before passing an adverse assessment order; marking 'N.A.' in hearing particulars violates that mandate. Obiter - Emphasis that opportunity must be granted 'in real terms' to serve natural justice and to enable a reasoned order. Conclusions: The assessing authority's issuance of a notice with 'N.A.' in hearing particulars amounts to denial of opportunity of personal hearing and contravenes statutory and natural justice requirements, warranting setting aside the assessment order. Issue 2 - Effect of absence of personal hearing on validity of assessment and appellate consideration Legal framework: Where an adverse civil liability is sought to be created by assessment, minimal opportunity of hearing is required as part of the principles of natural justice and as mandated by statutory provisions ensuring representations are considered. Precedent Treatment: The Court adhered to coordinate-bench precedents that a person/assessee need not request opportunity of personal hearing and that authorities must provide such opportunity before an adverse order; the Court also relied on external High Court authority supporting this principle. Interpretation and reasoning: Denial of personal hearing undermines both the fairness of the fact-finding and the quality of the reasons in the order. Granting a real opportunity enables the authority to consider explanations, potentially avoid unnecessary demands, and produce a reasoned order that can be meaningfully examined on appeal. Ratio vs. Obiter: Ratio - Failure to provide personal hearing in the manner required renders the assessment order legally infirm. Obiter - The practical benefit of personal hearing in improving administrative decision-making and appellate review. Conclusions: The absence of a proper personal hearing necessitates quashing the assessment and remitting the matter for fresh proceedings where a genuine hearing is afforded and the authority then passes an order considering representations. Issue 3 - Appellate authority's duty to recognise absence of hearing at assessment stage Legal framework: Appellate authorities are obliged to examine whether the assessing authority complied with mandatory procedural requirements, including affording an opportunity of hearing, when adjudicating appeals against assessment orders. Precedent Treatment: The Court applied its prior ruling that an appellate authority must recognize and correct instances where an assessing authority failed to provide the required hearing; prior decisions indicate such non-compliance vitiates the assessment. Interpretation and reasoning: Where the record shows that no date/time/venue for personal hearing was fixed and the notice itself indicates 'N.A.', the appellate authority cannot ignore that defect and dismiss the appeal without addressing the mandatory procedural lapse. The appellate order must acknowledge whether a hearing was in fact afforded and rectify the defect where necessary. Ratio vs. Obiter: Ratio - An appellate authority errs if it dismisses an appeal without recognizing or remedying the assessing authority's failure to afford a statutory/personal hearing. Obiter - Appellate forums should ensure that remittance is ordered for a fresh hearing rather than merely deciding on merits where procedural infirmity remains. Conclusions: The appellate order was unsustainable to the extent it failed to recognize that the assessing authority had not afforded a real personal hearing; accordingly the appellate decision was set aside and remittance for fresh proceedings ordered. Relief and Consequential Directions (limited to operative legal conclusions) Conclusions: The appropriate remedy for the established procedural breach is to set aside the impugned assessment and appellate orders and remit the matter to the assessing authority to issue fresh notice and afford a real opportunity of personal hearing within a specified timeframe; amounts provisionally deposited to remain subject to the outcome of the fresh proceedings. Cross-references and Clarifications 1. The obligation to afford personal hearing applies irrespective of any form entry by the assessee indicating a preference; the duty is imposed on the authority when an adverse order is contemplated (see Issue 1 and Issue 2). 2. Remittance for fresh hearing is the proper course where the assessing authority's failure to provide a hearing is established; the appellate authority must either remand or otherwise rectify the procedural lapse rather than dismissing an appeal without addressing that lapse (see Issue 3).