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Another ancillary issue involved the validity of the findings made by the tax authorities regarding the petitioner's entitlement to Input Tax Credit (ITC) on purchases from suppliers alleged to be bogus or whose registrations were cancelled, and the consequent demand of tax, interest, and penalty. However, the Court refrained from adjudicating on the merits of this issue in the present proceedings, focusing solely on the procedural impropriety.
Regarding the core issue of violation of natural justice and statutory mandate, the Court relied extensively on the legal framework provided under Section 75 of the CGST Act. Section 75 deals with general provisions relating to determination of tax and explicitly mandates in sub-section (4) that "an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person." This provision underscores the mandatory nature of personal hearing before passing any adverse order.
The Court referred to its prior authoritative decisions, notably the judgments in Graziano Trasmissioni India Pvt. Ltd. vs. State of Gujarat and Alkem Laboratories Ltd. vs. Union of India, which emphasized that personal hearing is an indispensable requirement under Section 75(4) and must be provided even if the concerned party does not explicitly request it. The rationale is to uphold the principles of natural justice and ensure fairness in administrative adjudication.
The Court noted that the respondent tax authorities had proceeded to pass the impugned order ex parte, without affording any opportunity of personal hearing to the petitioner. The department's defense that the proceedings were conducted online and that no hearing was granted because the petitioner did not request it was found to be legally untenable in light of the statutory mandate. The Court highlighted that the absence of hearing amounted to a clear breach of Section 75(4) and principles of natural justice.
On the facts, the petitioner had submitted detailed documents and explanations in response to the summons and show-cause notice, including GSTR-2A invoices, E-way bills, ledger accounts, and audit reports for the relevant financial years. Despite this, the tax officer adjudicated against the petitioner on the basis that the suppliers were bogus entities or had cancelled registrations, thereby invalidating the ITC claimed. However, since the order was passed without hearing, the Court declined to delve into the correctness of these factual findings at this stage.
In applying the law to the facts, the Court held that the procedural lapse of not providing personal hearing vitiated the impugned order. The Court quashed and set aside the order dated 17.02.2024 along with all consequential proceedings. It directed the tax authorities to pass a fresh order de novo after affording the petitioner a meaningful opportunity of hearing and considering all submissions in accordance with law. The fresh adjudication was to be completed within 12 weeks from the receipt of the Court's order.
The Court also underscored that no adjournments should be sought by the petitioner during the hearing and that the fresh order would be without prejudice to the rights and contentions of either party. This approach preserves the procedural fairness without prejudging the substantive issues.
The Court's treatment of competing arguments was straightforward. The petitioner's contention of violation of natural justice was accepted as a fundamental procedural defect. The State's argument that no hearing was required absent a request was rejected on statutory grounds. The Court did not address the merits of the tax demand or the validity of the ITC disallowance, emphasizing that such issues are to be decided afresh after due process.
Significant holdings from the judgment include the following authoritative principles:
"Section 75(4) of the CGST Act, 2017 provides that an opportunity of hearing is to be provided where a request is received in writing from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person."
"Even without any request having been made on the part of the party concerned, when any adverse decision is contemplated, personal hearing is a must."
"The absence of personal hearing constitutes a violation of the principles of natural justice and renders the impugned order liable to be quashed."
"The respondent authorities shall pass fresh de novo order after providing an opportunity of hearing to the petitioner and after considering the submissions which may be made by the petitioner in accordance with law."
In conclusion, the Court's final determination was to quash the impugned order-in-original dated 17.02.2024 for non-compliance with Section 75(4) of the CGST Act and principles of natural justice, and to remit the matter for fresh adjudication after affording the petitioner a personal hearing. The judgment reinforces the mandatory nature of personal hearing in tax adjudication proceedings involving adverse decisions and upholds procedural fairness as a cornerstone of administrative law under the GST regime.
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