2025 (4) TMI 677 - HC - GST

GST Assessment Order Invalidated Due to Procedural Lapses, Violation of Natural Justice Principles Under Section 75(4)

Palani Jayakumar Proprietor of M/s. J.K. Transport Versus The Deputy Commercial Tax Officer (ST), Padi Assessment Circle, Chennai

HC found procedural violations in GST assessment order. Respondent failed to consider petitioner's reply and denied personal hearing, violating Section ... Violation of principles of natural justice - no opportunity of personal hearing was provided by the respondent subsequent to the filing of reply - HELD THAT:- Initially, the notice in Form GST DRC-01 was issued on 21.11.2023, whereby the time limit for filing the reply was fixed on or before 21.12.2023. Accordingly, the reply was filed by the petitioner on 21.12.2023. Further, in the said notice, the date of personal hearing was fixed on 05.12.2023, which is around 2 weeks prior to the expiry of time limit, provided by the respondent, for filing the reply - Thereafter, though a detailed reply dated 21.12.2023 was filed by the petitioner, the impugned order came to be passed by the respondent by stating that no reply was filed by the petitioner. Hence, it is clear that the respondent had not at all considered the reply filed by the petitioner while passing the impugned order. Normally, if the respondents are intend to pass an adverse order against an Assessee, they are supposed to provide sufficient opportunity to them prior to the passing of assessment order. In such case, the personal hearing should have been fixed only after the filing of reply and if it was fixed before the filing of reply, no useful purpose will be served. Conclusion - It is clear that the impugned order was passed without providing any proper opportunity to the petitioner and hence, it is not only contrary to the provisions of Section 75(4) of the GST Act, but also in violation of principles of natural justice. In such view of the matter, this Court is inclined to set aside the impugned order dated 30.04.2024 passed by the respondent and the matter is remanded to the respondent for fresh consideration. Appeal allowed by way of remand. ISSUES PRESENTED and CONSIDEREDThe judgment revolves around two primary issues:1. Whether the respondent failed to consider the reply filed by the petitioner before passing the impugned assessment order dated 30.04.2024.2. Whether the respondent violated the principles of natural justice and the provisions of Section 75(4) of the GST Act, 2017 by not providing an opportunity for a personal hearing to the petitioner after the filing of the reply.ISSUE-WISE DETAILED ANALYSISIssue 1: Consideration of the Petitioner's Reply- Relevant Legal Framework and Precedents: Section 75(4) of the GST Act, 2017 mandates that the authority must consider the reply submitted by an assessee before passing any adverse order.- Court's Interpretation and Reasoning: The Court noted that the respondent issued a show cause notice on 21.11.2023, with a deadline for reply on or before 21.12.2023. The petitioner submitted a reply on the due date. However, the respondent passed the impugned order on 30.04.2024, claiming no reply was filed. The Court found this assertion incorrect, indicating the respondent failed to consider the petitioner's reply.- Key Evidence and Findings: The evidence presented showed that the petitioner indeed filed a reply on 21.12.2023, which the respondent did not acknowledge in the impugned order.- Application of Law to Facts: By not considering the reply, the respondent violated Section 75(4) of the GST Act, which requires the authority to take into account the assessee's response before finalizing an order.- Treatment of Competing Arguments: The respondent argued that the reply was insufficient and unclear. However, the Court emphasized that the respondent's duty was to consider the reply, regardless of its perceived clarity, before making a decision.- Conclusions: The Court concluded that the respondent's failure to consider the petitioner's reply rendered the impugned order procedurally flawed.Issue 2: Violation of Principles of Natural Justice- Relevant Legal Framework and Precedents: Principles of natural justice dictate that an affected party must be given a fair opportunity to present their case, including the right to a personal hearing if adverse action is contemplated.- Court's Interpretation and Reasoning: The Court observed that the date for a personal hearing was set for 05.12.2023, prior to the deadline for filing a reply. The respondent did not offer a subsequent hearing after the reply was filed, contravening natural justice principles and Section 75(4) of the GST Act.- Key Evidence and Findings: The timeline of events showed the personal hearing was scheduled before the reply deadline, and no further hearing was provided after the reply was submitted.- Application of Law to Facts: The Court applied the principle that a personal hearing is essential after a reply is filed to ensure fairness and compliance with statutory requirements.- Treatment of Competing Arguments: The respondent acknowledged the procedural misstep regarding the hearing schedule but did not provide a justification for the lack of a subsequent hearing.- Conclusions: The Court determined that the respondent's actions violated the principles of natural justice, necessitating the setting aside of the impugned order.SIGNIFICANT HOLDINGS- Preserve verbatim quotes of crucial legal reasoning: 'The impugned order was passed without providing any proper opportunity to the petitioner and hence, it is not only contrary to the provisions of Section 75(4) of the GST Act, but also in violation of principles of natural justice.'- Core Principles Established: Authorities must adhere to procedural fairness by considering replies and providing personal hearings after replies are filed, as mandated by statutory provisions and natural justice principles.- Final Determinations on Each Issue: The impugned order dated 30.04.2024 was set aside due to procedural deficiencies. The matter was remanded for fresh consideration, allowing the petitioner to file an additional reply within 15 days, followed by a personal hearing with a 14-day notice. The attachment of the petitioner's bank account was also ordered to be lifted.