2024 (7) TMI 1514 - HC - GST

Taxpayer Wins: Natural Justice Prevails as Procedural Fairness Trumps Arbitrary Tax Assessment Under Section 75(4)

HC upheld principles of natural justice in tax assessment, finding the Assistant Commissioner violated Section 75(4) of U.P. GST Act by denying oral ... Challenge to order whereby demand in excess has been raised - petitioner was completely denied opportunity of oral hearing before the Assessing Authority - violation of principles of natural justice - HELD THAT:- The view taken by the coordinate bench in BHARAT MINT AND ALLIED CHEMICALS VERSUS COMMISSIONER COMMERCIAL TAX AND 2 OTHERS [2022 (3) TMI 492 - ALLAHABAD HIGH COURT] is completely agreed upon - It has been laid down by way of a principle of law that a person/assessee is not required to request for 'opportunity of personal hearing' and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order. Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms - the impugned order itself has been passed on 19.04.2024, while reply to the show-cause-notice had been entertained on 19.01.2024. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created. Not only such opportunity would ensure observance of rules of natural of justice but it would also allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage, if required. The matter is remitted to the respondent no.2/ Assistant Commissioner, State Tax, Sector - 1, Prayagraj to issue a fresh notice to the petitioner within a period of two weeks from today - petition disposed off by way of remand. Issues:Challenge to order passed by Assistant Commissioner for tax period 2018-19, denial of opportunity of oral hearing before Assessing Authority, interpretation of Section 75(4) of the U.P. GST Act, 2017, requirement of personal hearing before passing an adverse assessment order, adherence to principles of natural justice in assessment orders creating civil liability.Analysis:The petitioner challenged an order passed by the Assistant Commissioner for the tax period 2018-19, raising a demand in excess of Rs. 28,889. The main contention was the denial of an opportunity for oral hearing before the Assessing Authority. The petitioner argued that as per Section 75(4) of the U.P. GST Act, 2017, the Assessing Authority was obligated to provide a personal hearing before passing an adverse assessment order. Reference was made to a previous court decision and a Gujarat High Court case to support this argument.The High Court examined Section 75(4) of the Act and agreed with the interpretation provided by a coordinate bench in a previous case. It was established that a person/assessee is not required to request a personal hearing; rather, it is mandatory for the Assessing Authority to provide this opportunity before making an adverse order. The court emphasized that in cases involving significant civil liability, ensuring a fair opportunity of hearing is essential as a principle of natural justice.The court highlighted the importance of granting a genuine opportunity of hearing to uphold the rules of natural justice. It was noted that the impugned order was issued without proper hearing, leading to potential ambiguity in the assessee's response. Providing an opportunity for hearing not only upholds fairness but also enables the authority to make well-reasoned decisions that serve the interests of justice and facilitate better understanding at subsequent stages, including appeals.Consequently, the High Court disposed of the writ petition, setting aside the order dated 19.04.2024. The matter was remitted back to the Assistant Commissioner to issue a fresh notice to the petitioner within two weeks, ensuring the petitioner's appearance for expeditious proceedings. This decision aimed to rectify the lack of opportunity for a personal hearing and uphold the principles of natural justice in the assessment process.