GST assessment orders set aside for denying personal hearing opportunity under Section 75(4)

The Patna HC allowed the petition challenging GST assessment orders for 2017-18, 2018-19, and 2019-20. The court calculated limitation periods under Section 73(10) of GST Act, excluding COVID-19 pandemic period (15.03.2020 to 28.02.2022) as per SC directions, extending limitation dates to 21.01.2025, 28.02.2025, and 28.02.2025 respectively. The assessment orders were set aside for violating statutory mandate under Section 75(4) requiring personal hearing opportunity before passing adverse orders. Matter remitted to Assessing Officers to issue proper notices and complete assessment within three months.

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Issues Involved:

1. Extension of limitation under Section 73 (10) of the GST Act due to the COVID-19 pandemic.
2. Validity of notifications issued under Section 168A of the GST Act.
3. Requirement of notice under Section 61 and Rule 99 of the GST Act before initiating proceedings under Section 73.
4. Violation of principles of natural justice due to non-provision of personal hearing as mandated under Section 75 (4) of the GST Act.

Issue-wise Detailed Analysis:

1. Extension of Limitation:

The primary issue addressed in this judgment pertains to the extension of the limitation period for assessment orders under Section 73 (10) of the GST Act due to the COVID-19 pandemic. The petitioners challenged the extension, arguing that the notifications extending the limitation period were issued after the pandemic situation had subsided. The court examined the statutory provisions and the impact of the pandemic on statutory compliances. It was noted that the Hon'ble Supreme Court had excluded the period from 15.03.2020 to 28.02.2022 from the limitation period for judicial and quasi-judicial proceedings, recognizing the disruption caused by the pandemic. The court upheld the extensions, finding them consistent with the Supreme Court's directives and necessary to mitigate the difficulties faced during the pandemic.

2. Validity of Notifications under Section 168A:

The court addressed the petitioners' challenge to the notifications issued under Section 168A of the GST Act, which extended the limitation period. The petitioners argued that the notifications were not sustainable as they were issued when the pandemic was no longer a force majeure situation. The court analyzed the statutory framework and the recommendations of the GST Council, which were made in light of the pandemic's impact on tax administration. The court found that the notifications were issued with due consideration and in accordance with the statutory provisions, including retrospective effect as allowed under Section 168A. The court also noted the ratification of these notifications by the GST Council in subsequent meetings.

3. Requirement of Notice under Section 61 and Rule 99:

The petitioners contended that proceedings under Section 73 should be preceded by a notice under Section 61 and Rule 99 of the GST Act, which involves scrutiny of returns. The court clarified that Section 73 is a standalone provision that can be invoked independently when the Proper Officer identifies tax discrepancies, erroneous refunds, or wrongful claims of input tax credit. The court held that a notice under Section 61 is not a prerequisite for initiating proceedings under Section 73, as the latter involves a more significant level of discrepancy than mere scrutiny.

4. Violation of Principles of Natural Justice:

The court examined the petitioners' claims regarding the violation of natural justice due to the lack of personal hearings as required under Section 75 (4) of the GST Act. The court emphasized that the statutory mandate for a personal hearing is clear and must be adhered to when an adverse decision is contemplated. In cases where assessment orders were passed without granting a personal hearing, the court set aside those orders and remanded the matters to the respective Assessing Officers to provide an opportunity for a personal hearing. For petitions where a personal hearing was afforded, the court found no reason to interfere with the impugned orders.

Conclusion:

The court upheld the validity of the notifications extending the limitation period under the GST Act, recognizing the extraordinary circumstances of the COVID-19 pandemic. It clarified the procedural requirements under Sections 61, 73, and 75, ensuring adherence to principles of natural justice. The judgment balances statutory compliance with the need for fairness in tax administration during unprecedented times.

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