2025 (4) TMI 487 - HC - GST

GST Orders Invalidated Due to Lack of Fair Hearing, Petitioner's Right to Present Case Upheld Under Natural Justice Principles

HC ruled that impugned GST orders violated principles of natural justice by denying petitioner adequate opportunity to present their case. The court set ... Violation of principles of natural justice - challenge to impugned order in Form GST DRC-07 dated 23.08.2024 along with the consequential rejection order of the rectification application - HELD THAT:- On perusal of records, it is seen that the respondent issued a show-cause notice dated 14.06.2024, calling upon the petitioner's reply and fixing date of personal hearing on 16.08.2024. The said show cause notice was issued on account of certain defects noticed in excess ITC availed by the petitioner and for suppression of turnover. Thereafter, the petitioner filed an adjournment letter seeking time to file a detailed reply along with relevant documents. However, the respondent without considering the same, passed the impugned order. Thus, this Court is of the view that the impugned order suffers from violation of principles of natural justice. Hence, this Court is inclined to set aside the impugned order. Petition disposed off. ISSUES PRESENTED and CONSIDEREDThe primary legal issues considered by the Court were:Whether the impugned order in Form GST DRC-07 dated 23.08.2024, and the consequential rejection order of the rectification applications dated 13.01.2025, were issued in violation of the principles of natural justice.Whether the petitioner was afforded adequate opportunity to present their case, including the submission of replies and supporting documents, before the issuance of the impugned orders.Whether the rejection of the rectification application for subsequent years, despite similar facts leading to a different outcome in a previous year, was justified.ISSUE-WISE DETAILED ANALYSISViolation of Principles of Natural JusticeRelevant Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to present their case. This includes the right to be heard and the right to a fair adjudication process.Court's Interpretation and Reasoning: The Court noted that the petitioner was not given adequate opportunity to respond to the show-cause notice due to the rejection of their request for an adjournment to file a detailed reply with supporting documents. The Court emphasized the importance of adhering to principles of natural justice, which were not followed in this case.Key Evidence and Findings: The petitioner had submitted an adjournment letter requesting additional time to prepare a response, which was ignored by the respondent, leading to the issuance of the impugned order without considering the petitioner's side.Application of Law to Facts: The Court applied the principles of natural justice to the facts, determining that the impugned orders were issued without giving the petitioner a fair chance to present their case, thereby violating these principles.Treatment of Competing Arguments: The Government Advocate argued that the petitioner failed to appear for the personal hearing, justifying the issuance of the order. However, the Court found that the petitioner's request for an adjournment was not considered, which was a critical oversight.Conclusions: The Court concluded that the impugned orders were issued in violation of natural justice principles and therefore should be set aside.Rejection of Rectification ApplicationRelevant Legal Framework and Precedents: Rectification applications allow for the correction of errors in prior orders, especially when similar facts have led to different outcomes in different years.Court's Interpretation and Reasoning: The Court observed that the rectification application for a previous year with similar facts was allowed, but the application for subsequent years was rejected without explanation, indicating inconsistency and lack of reasoned decision-making.Key Evidence and Findings: The petitioner highlighted that their rectification application for the financial year 2019-2020 was allowed, but similar applications for subsequent years were rejected without reasons.Application of Law to Facts: The Court found that the rejection of the rectification application for subsequent years was arbitrary and lacked a reasoned basis, especially given the allowance of a similar application for a previous year.Treatment of Competing Arguments: The respondents did not provide sufficient justification for the differing treatment of rectification applications across different years.Conclusions: The Court determined that the rejection of the rectification application was unjustified and required reconsideration.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'This Court is of the view that the impugned order suffers from violation of principles of natural justice.'Core Principles Established: The judgment reinforces the necessity of adhering to principles of natural justice by ensuring parties have a fair opportunity to present their case before an order is issued. It also highlights the need for consistency and reasoned decision-making in the treatment of rectification applications.Final Determinations on Each Issue: The Court set aside the impugned orders dated 23.08.2024 and 13.01.2025, remanding the matter back to the third respondent for fresh consideration. The petitioner was directed to submit their reply with relevant documents, and the respondent was instructed to provide a reasoned order after a personal hearing.