2024 (4) TMI 1031 - HC - GST

Tax authority violated natural justice by scheduling personal hearings before reply deadline under Section 75(4) CGST Act

Mahindra & Mahindra Limited Versus Union of India, State of Chhattisgarh, Central Board of Indirect Taxes and Customs, Joint Commissioner of State Tax Raipur.

The Chhattisgarh HC allowed the appeal, finding violation of natural justice principles under Section 75(4) of the CGST Act. The tax authority scheduled ... Violation of principles of natural justice - appellant has been non-suited on the ground of alternate remedy - personal hearing was not given (on seeking adjournment for personal hearing) - mandate of Section 75 (4) stands complied or not - Tax not paid or short paid - HELD THAT:- The opportunity of hearing when is contemplated under the statute, it has to be comprehensive and it cannot be short-circuited. The show cause notice reflects that the date of reply was given on 30.10.2023 and before the personal hearing date is given, it would be about a superfluous and would defeat the actual intent of the legislation of giving an opportunity of hearing. It is not expected that before the reply is filed, an assessee can be heard and thereafter the reply is filed. It is against the normal procedure and is against the normal practice of the parties that personal hearing is preponed and the reply is subsequently filed. This is not the intent of provisions of sub-Sections (4) and (5) of Section 75. The Supreme Court has in number of occasion has held that the opportunity of hearing means granting real and meaningful opportunity and adequate time must given to prepare and present the defence - Supreme Court in UMA NATH PANDEY VERSUS STATE OF UP. [2009 (3) TMI 526 - SUPREME COURT] has observed Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. It is one of the established principles of Common Law that officials taking action of a judicial nature must give an adequate opportunity of being heard to a person against whom the action is proposed to be taken. In the given case without filing the reply, it cannot be understood how personal hearing can be justified. When the assessee is burdened with a tax liability, then the intent and the object of the statute are strictly to be complied with. Prima Facie, sub-Section 4 of Section 75 of the CGST Act was completely shelved before the order dated 29.12.2023 was passed - The Supreme Court in KALPRAJ DHARAMSHI & ANR. VERSUS KOTAK INVESTMENT ADVISORS LTD. & ANR. [2021 (3) TMI 496 - SUPREME COURT] has held that when the principles of natural justice has not been followed, the litigant would be entitled to invoke the jurisdiction of High Court under Article 226 of the Constitution of India. Now coming back to the hearing, the judgments which has been relied on by counsel for the appellant i.e. FINO PAYTECH LIMITED VERSUS UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF FINANCE & ANR. [2024 (4) TMI 284 - BOMBAY HIGH COURT] and MS KEC INTERNATIONAL LIMITED VERSUS UNION OF INDIA AND 3 OTHERS [2024 (2) TMI 359 - ALLAHABAD HIGH COURT], also fall in the same line wherein, the High Courts have repeatedly held that when the statute contains a mandate of hearing which is synonym to natural justice, it cannot be given a go bye or can be made porous, therefore, the order dated 29.12.2023 wherein, it has been recorded that the personal hearing was given on 11.10.2023 and 25.10.2023 would amount to defeat the rules of natural justice and the object of the legislation. The order if is allowed to be maintained, it would amount to allow a script with flaws. Thus, the appellant would be entitled for personal hearing according to mandate of sub-Sections (4) and (5) of Section 75 of the CGST Act. Appeal allowed. Issues Involved:1. Alternate Remedy2. Opportunity of Hearing3. Principles of Natural Justice4. Statutory ComplianceSummary:1. Alternate Remedy:The appeal is against the Order dated 21.03.2024 in Writ Petition (Tax) No. 42 of 2024, where the appellant was non-suited on the ground of alternate remedy.2. Opportunity of Hearing:The appellant, a regular assessee, was served a notice u/s 73(1) of the CGST Act, 2017, for a contemplated tax not paid or short paid on 29.09.2023. The appellant sought an extension for reply, but an adverse order was passed on 29.12.2023 without granting an opportunity of hearing, violating Section 75(4) of the CGST Act. The appellant argued that the principles of natural justice were defeated and relied on the Supreme Court's decision in Kalpraj Dharamshi v. Kotak Investment Advisors Limited, which allows invoking jurisdiction under Article 226 of the Constitution when natural justice is violated.3. Principles of Natural Justice:The court emphasized that Section 75(4) mandates a comprehensive opportunity of hearing. The show cause notice indicated a reply date of 30.10.2023, but personal hearings were scheduled before this date, which is against the normal procedure and legislative intent. The Supreme Court has held that a meaningful opportunity of hearing must be provided, as seen in Umanath Pandey v. State of UP and Dharampal Satyapal Ltd. v. CCE. Oral hearings are crucial for adjudication, as highlighted in Automotive Tyre Manufacturers Assn. v. Designated Authority and the US case of Goldberg v. Kelly.4. Statutory Compliance:The court found that sub-Section 4 of Section 75 of the CGST Act was not complied with before passing the order dated 29.12.2023. The Supreme Court in Kalpraj Dharamshi stated that breach of natural justice allows invoking High Court jurisdiction under Article 226. The court disagreed with the Single Bench's order and set it aside, emphasizing that statutory mandates of hearing must be upheld.Conclusion:The court allowed the appeal, directing the parties to appear before the Joint Commissioner of State Tax on 08.05.2024 for a personal hearing as per the mandate of sub-Sections (4) and (5) of Section 75 of the CGST Act.