2025 (3) TMI 244 - HC - GST

Order Overturned Due to Violation of Natural Justice; Section 75(4) GST Act Cited for Lack of Fair Hearing

M/s. Panvo Organics Private Limited Versus The Assistant Commissioner, Gummidipoondi : Tiruvallur Tamil Nadu

The court set aside the impugned order dated 22.04.2024, finding that the respondent violated principles of natural justice by not providing the ... Violation of principles of natural justice - failure on the part of the respondent to provide an opportunity of personal hearing to the petitioner prior to the passing of impugned order - HELD THAT:- Initially, the notice in Form GST DRC-01 was issued on 26.12.2023, wherein the time limit was fixed for filing the reply on or before 25.01.2024. Accordingly, the reply was filed on 25.01.2024. Further, in the said notice, the date of personal hearing was fixed on 03.01.2024, which is 3 weeks prior to the expiry of time limit, provided by the respondent, for filing the reply. Though a detailed reply dated 25.01.2024 was already filed by the petitioner, without considering the same, a reminder notice dated 07.03.2024 has been issued by the respondent, whereby once again the time limit for filing the reply was fixed as on or before 14.03.2024 and the date of personal hearing was fixed on 11.03.2024. Subsequently, the petitioner had filed his 2nd reply dated 14.03.2024 along with a copy of the 1st reply dated 25.01.2024. Thereafter, without providing any opportunity of personal hearing, the respondent had passed the impugned order dated 22.04.2024, which is contrary to the provisions of Section 75(4) of the GST Act, 2017. Conclusion - The impugned order was passed in violation of principles of natural justice without providing any proper opportunity to the petitioner. In such view of the matter, this Court is inclined to set aside the impugned order dated 22.04.2024 passed by the respondent. Petition disposed off by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the impugned adjudication order was passed in violation of Section 75(4) of the GST Act, 2017 by failing to provide an effective opportunity of personal hearing prior to passing an adverse order. 2. Whether fixation of a date for personal hearing prior to the expiry of the time allowed for filing a reply renders the hearing meaningless and violates principles of natural justice. 3. Appropriate remedial relief where an adjudicating authority proceeds to pass an adverse order after issuing a reminder and after the taxpayer filed a substantive reply but without affording a fresh, effective personal hearing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Violation of Section 75(4) of the GST Act by failure to provide effective personal hearing Legal framework: Section 75(4) (GST Act, 2017) contemplates that when an authority intends to pass an adverse order, sufficient opportunity must be afforded to the assessee, including opportunity to be heard; principles of natural justice apply to adjudicatory proceedings under the GST regime. Precedent Treatment: The Court refers to its own practice and prior directions (general observation) condemning procedural practices that render hearings ineffective; earlier decisions of this Court are applied by analogy to require meaningful hearings. Interpretation and reasoning: The Court examined the sequence of communications: initial show cause notice with deadline for reply and a personal hearing date set prior to the reply deadline; subsequent reminder fixing another hearing date again prior to, or without regard to, the filed reply; and passage of the impugned order without affording any subsequent effective personal hearing after the petitioner filed substantive replies. The Court reasoned that where a substantive reply is on record, an effective opportunity to be heard must be provided before passing an adverse order; absence of such opportunity constitutes a breach of statutory obligation and natural justice. Ratio vs. Obiter: Ratio - an adverse adjudication under the GST Act is invalidated if passed without affording an effective personal hearing after a substantive reply is filed; Obiter - broader administrative training suggestions made by the Court to the Department to conduct refresher courses for officers. Conclusion: The impugned order was passed contrary to Section 75(4) and in violation of principles of natural justice; it was set aside and remitted for fresh consideration with directions to afford an effective hearing. Issue 2 - Effectiveness of a personal hearing fixed before expiry of the reply period Legal framework: Procedural fairness requires that dates of personal hearing should be fixed so as to allow the party a real opportunity to file and have their reply considered; administrative procedures under the GST regime must not render statutory safeguards illusory. Precedent Treatment: The Court relied on its own established view that fixation of hearings prior to the date allowed for filing a reply has been repeatedly held to be an 'eye-wash' and achieves no useful purpose; such practice is unacceptable. Interpretation and reasoning: The Court observed that fixing a personal hearing three weeks before the expiry of the reply period (and before receipt of the substantive reply) defeats the purpose of allowing a reply; where an authority nevertheless fixes such a hearing and then proceeds to ignore subsequent replies, the hearing is ineffective. The Court noted recurring non-compliance by departmental officers with these principles. Ratio vs. Obiter: Ratio - personal hearings fixed prior to the expiry of the reply period are likely to be ineffective and cannot substitute for a hearing held after consideration of the reply; Obiter - admonition to the Department to educate officers and hold refresher courses. Conclusion: Personal hearings should ordinarily be fixed only after the filing of the reply; hearings fixed prior to reply filing will generally be ineffective and cannot cure a breach of natural justice where a reply is later filed and not considered. Issue 3 - Appropriate relief and directions where procedural infirmity is found Legal framework: Judicial power to quash administrative orders suffering from procedural illegality and to remit for fresh consideration with directions to cure defects; principles of expeditious adjudication consistent with law. Precedent Treatment: The Court applied established remedial principles - setting aside the impugned order, remanding for fresh consideration, and prescribing time-bound and procedural steps to ensure fairness. Interpretation and reasoning: Given the admitted facts (substantive replies on record, hearings fixed before replies, and no effective hearing thereafter), the Court concluded that quashing and remand with clear procedural directions was the appropriate remedy to vindicate statutory and constitutional fairness without deciding merits. The Court directed the taxpayer to file replies within 15 days of the order and directed the authority to issue a clear 14-days notice fixing a personal hearing thereafter and to pass orders on merits expeditiously and in accordance with law. Ratio vs. Obiter: Ratio - where an adjudicatory order is tainted by denial of effective hearing, the proper relief is to set aside the order and remit with directions to afford a clear, time-bound opportunity to be heard and then decide on merits; Obiter - expectations about departmental compliance and training. Conclusion: The impugned order was set aside; the matter remitted with directions to permit filing of reply within 15 days and to issue a 14-days clear notice for personal hearing before deciding afresh on merits and in accordance with law. Cross-references and Observations 1. The issues are interrelated: the invalidity under Section 75(4) stems from the ineffectiveness of personal hearings fixed before filing of replies (see Issue 1 and Issue 2). 2. Remedy directed is procedural and prospective - the Court did not adjudicate the substantive allegations but required fresh consideration after compliance with mandated hearing procedure (see Issue 3). 3. Administrative guidance: The Court suggested departmental refresher training to ensure officers follow statutory procedure and prior judicial directions regarding timing and utility of personal hearings (obiter observation intended to prevent recurrence).