2025 (4) TMI 1583 - HC - GST

Tax Assessment Order Invalidated for Procedural Flaws, Taxpayer's Right to Hearing Upheld Under Section 75(4) CGST Act

HC found that the tax assessment order was procedurally invalid due to two critical violations: (1) failure to provide personal hearing as mandated by ... Principles of natural justice - assessment order passed by the respondent without providing an opportunity of personal hearing to the petitioner - HELD THAT:- Considering the submissions made by the learned counsel for the petitioner as well as the learned Additional Government Pleader appearing for the respondent, it is evident that though the reply has been filed by the petitioner, without taking into consideration of the reply filed by the petitioner and without providing an opportunity of personal hearing, the assessment order has been passed, which is totally against the provision under Section 75(4) of the Central Goods and Services Tax Act, 2017. This Court is of the view that the assessment order came to be passed without affording opportunity of personal hearing to the petitioner to establish their case, thereby violating the principles of natural justice and that it is just and necessary to provide an opportunity to the petitioner to establish their case on merits and in accordance with law - Petition allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:(a) Whether the assessment order passed by the respondent without providing an opportunity of personal hearing to the petitioner violates the principles of natural justice and the statutory provisions under the Central Goods and Services Tax Act, 2017;(b) Whether the respondent was justified in passing the assessment order without considering the reply filed by the petitioner;(c) Whether the impugned order dated 05.02.2025 should be quashed and the matter remanded for fresh consideration in accordance with law.2. ISSUE-WISE DETAILED ANALYSISIssue (a): Violation of principles of natural justice and statutory provisions by passing assessment without personal hearingRelevant legal framework and precedents: The Court referred to Section 75(4) of the Central Goods and Services Tax Act, 2017, which mandates that before passing an assessment order, the assessing authority shall provide an opportunity of being heard to the person liable to pay tax. This provision embodies the principles of natural justice, ensuring that no order prejudicial to a party is passed without affording them a chance to present their case.Court's interpretation and reasoning: The Court noted that the respondent issued a show cause notice under Section 73 of the Tamil Nadu GST Act, 2017, proposing to demand tax due to discrepancies between turnover declared in GSTR 3B and TDS deducted as per Form 26AS. Although the petitioner filed a reply with supporting documents and sought a personal hearing, the respondent passed the assessment order on the very same day without considering the reply or granting the requested hearing.Key evidence and findings: The petitioner was unaware of the show cause notice until informed telephonically by the respondent. The petitioner promptly filed a detailed reply and requested a personal hearing. The respondent's failure to consider this reply or provide a hearing was admitted by the Additional Government Pleader.Application of law to facts: The Court held that passing the assessment order without affording a personal hearing and without considering the petitioner's reply contravenes Section 75(4) of the CGST Act and violates the principles of natural justice.Treatment of competing arguments: The respondent candidly conceded the procedural lapse and did not dispute the requirement of personal hearing. The Court found no justification for bypassing this mandatory procedural safeguard.Conclusions: The assessment order passed without personal hearing is invalid and liable to be set aside.Issue (b): Consideration of petitioner's reply before passing assessmentRelevant legal framework and precedents: The procedural fairness under GST law requires that replies and objections filed by the taxpayer in response to show cause notices be duly considered before finalizing assessment orders.Court's interpretation and reasoning: The petitioner's reply explained the discrepancy in turnover as arising from receipt of payments for works completed in the pre-GST period, supported by documentary evidence. The respondent failed to consider this explanation before passing the order.Key evidence and findings: The petitioner's reply dated 28.12.2023 and accompanying documents were on record. The assessment order was passed on the same day, indicating no meaningful consideration.Application of law to facts: The Court found that ignoring the petitioner's explanation amounted to denial of a fair opportunity to establish the case on merits.Treatment of competing arguments: The respondent did not dispute the failure to consider the reply and accepted the need for reconsideration if directed by the Court.Conclusions: The assessment order is unsustainable for non-consideration of the petitioner's reply.Issue (c): Whether the impugned order should be quashed and matter remandedRelevant legal framework and precedents: The power of the High Court under writ jurisdiction to quash orders passed in violation of natural justice and to direct reconsideration in accordance with law.Court's interpretation and reasoning: Given the procedural infirmities, the Court found it just and necessary to set aside the impugned order and remit the matter for fresh consideration with due opportunity of hearing.Key evidence and findings: The respondent's admission of procedural lapse and willingness to reconsider the matter were relevant factors.Application of law to facts: The Court directed the respondent to consider the petitioner's reply, provide a personal hearing, and pass appropriate orders expeditiously, preferably within three weeks.Treatment of competing arguments: No opposition to remand was raised by the respondent.Conclusions: The impugned order dated 05.02.2025 is set aside and the matter remanded for fresh decision after hearing the petitioner.3. SIGNIFICANT HOLDINGSThe Court held: 'It is evident that though the reply has been filed by the petitioner, without taking into consideration of the reply filed by the petitioner and without providing an opportunity of personal hearing, the assessment order has been passed, which is totally against the provision under Section 75(4) of the Central Goods and Services Tax Act, 2017.'The Court further stated: 'The assessment order came to be passed without affording opportunity of personal hearing to the petitioner to establish their case, thereby violating the principles of natural justice and that it is just and necessary to provide an opportunity to the petitioner to establish their case on merits and in accordance with law.'Accordingly, the Court set aside the impugned order and directed the respondent to consider the petitioner's reply, fix a date for personal hearing, and pass appropriate orders on merits and in accordance with law within a stipulated time frame.