GST adjudication orders set aside for excess ITC and short payment due to mandatory personal hearing violation under Section 75(4)

The HC set aside GST adjudication orders (DRC-07) for excess ITC availment and short GST payment due to violation of natural justice principles. The court held that under Section 75(4) of GST Act, personal hearing is mandatory when adverse decisions are contemplated against taxpayers, regardless of whether specifically requested. Since respondents failed to provide personal hearing opportunity before issuing the orders, the decision-making process was vitiated and contrary to statutory requirements, resulting in proceedings being set aside.

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Issues:
1. Challenge to adjudication order in form GST DRC-07 for excess availment of Input Tax Credit and short payment of output GST.
2. Violation of principles of natural justice in passing the impugned order under Section 74 of the CGST Act/MPGST Act.
3. Requirement of providing opportunity of hearing under Section 75(4) of the CGST Act/MPGST Act.
4. Interpretation of "opportunity of hearing" and "personal hearing" under the Act.
5. Compliance with statutory provisions for opportunity of hearing in the case.
6. Setting aside the impugned proceedings and directing the provision of a hearing to the petitioner.

Detailed Analysis:
1. The petition challenged an adjudication order in form GST DRC-07, contesting excess Input Tax Credit and short payment of output GST. The order imposed a demand of Rs. 6,55,69,500/- along with interest and penalty. The petitioners alleged that the order was passed without providing an opportunity of hearing, violating principles of natural justice and fair hearing.

2. The petition argued that the impugned order under Section 74 of the CGST Act/MPGST Act did not consider the representation made by the petitioner before determining the tax, interest, and penalty due. The failure to provide a hearing before passing the order was highlighted as a violation of natural justice principles.

3. Section 75(4) of the CGST Act/MPGST Act mandates the grant of an opportunity of hearing where an adverse decision is contemplated against the taxpayer. The petitioners contended that the impugned order was passed without affording them the opportunity of being heard, contrary to the legal requirement.

4. The interpretation of "opportunity of hearing" and "personal hearing" under the Act was debated. The petitioners argued that the use of the word "or" in the statute indicated that a personal hearing must be provided even if not specifically requested, when an adverse decision is contemplated. The State's counsel, however, contended that "opportunity of hearing" did not necessarily include a "personal hearing."

5. The court analyzed the statutory provisions and previous judgments to determine the scope of providing a hearing to the petitioner. It was concluded that the absence of a personal hearing, despite an adverse decision being contemplated, rendered the decision-making process flawed and contrary to natural justice principles.

6. Consequently, the court set aside the impugned proceedings and directed the respondents to provide a hearing to the petitioner within three months, conducted by an officer other than the one who issued the show cause notice. The court clarified that its decision did not express any opinion on the merits of the case and made no order as to costs.

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