GST assessment order set aside for denying mandatory personal hearing under Section 75(4) CGST Act

The HC set aside a GST assessment order dated 29.04.2024 passed under Form DRC-07 for violation of natural justice principles. The petitioner challenged the order demanding tax, interest, and penalty for April 2018-March 2019, arguing it was passed without providing mandatory personal hearing under Section 75(4) of CGST Act. Following a Division Bench precedent in CWJC No. 18648/2024, the Court remitted the matter to the Assessing Officer with directions to grant personal hearing through authorized representative before passing fresh orders. The petitioner must appear on 30th June 2025, with the Assessing Officer required to decide within three months thereafter or within limitation period, whichever is later.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the show cause notice issued under the CGST and BGST Acts for the period April 2018 to March 2019 is time barred under Section 73 of the BGST/CGST Act, 2017;

(b) Whether the assessment order passed in Form DRC-07 demanding tax, interest, and penalty without providing sufficient opportunity of personal hearing violates the principles of natural justice and statutory mandate under Section 75(4) of the CGST Act;

(c) Whether the extension of the limitation period under Section 73(2) and (10) of the CGST Act by Notification No. 56/2023 CT dated 28.12.2023, issued under Section 168A of the Act, is justified in the absence of special circumstances and recommendation by the GST Council;

(d) The appropriate reliefs available to the petitioner in light of the above issues.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Time bar of the show cause notice under Section 73 of BGST/CGST Act, 2017

The petitioner contended that the show cause notice dated 19.12.2023 demanding tax, interest, and penalty for the period April 2018 to March 2019 is barred by limitation as per Section 73 of the BGST/CGST Act, 2017. Section 73 prescribes a three-year limitation period for issuance of show cause notices for tax recovery in cases of non-payment or short payment of tax. The petitioner argued that no valid extension of limitation applies to this case, thus rendering the notice invalid.

The Court noted the reliance on the statutory framework under Section 73 and the contention that the extension notification (No. 56/2023 CT dated 28.12.2023) relied upon by the revenue is unjustified as the extension must be for special circumstances and recommended by the GST Council as per Section 168A of the Act. The petitioner asserted that since a prior extension notification (No. 13/2022 CT dated 05.07.2022) had already extended the limitation period, no further extension could be validly granted.

The Court, however, refrained from expressing any definitive opinion on the validity of the limitation or extension notification, as the matter was primarily disposed of on procedural grounds.

Issue (b): Violation of principles of natural justice and statutory mandate under Section 75(4) of the CGST Act

The petitioner challenged the assessment order dated 29.04.2024 (Form DRC-07) on the ground that it was passed without granting a personal hearing, thus violating the principles of natural justice and the statutory requirement under Section 75(4) of the CGST Act, which mandates an opportunity of personal hearing before passing an assessment order.

The petitioner relied on a recent Division Bench judgment of this Court dated 09.01.2025 in CWJC No. 18648 of 2024, where a similar contention was upheld, and the impugned order was set aside for failure to provide personal hearing. The petitioner urged the Court to follow the same ratio and set aside the impugned order in the present case.

The Court noted the submissions and the binding nature of the Division Bench decision. The State respondents conceded the similarity of facts and did not oppose the relief sought on this ground.

Consequently, the Court set aside the impugned order dated 29.04.2024 without delving into the merits of the case and remitted the matter to the Assessing Officer with a clear direction to provide the petitioner a personal hearing through its authorized representative before passing a fresh order.

Issue (c): Validity of Notification No. 56/2023 CT dated 28.12.2023 extending limitation under Section 168A of the CGST Act

The petitioner challenged the issuance of Notification No. 56/2023 CT dated 28.12.2023, which purportedly extended the limitation period under Section 73(2) and (10) of the CGST Act, contending that such extension must be for special circumstances and recommended by the GST Council as mandated by Section 168A. The petitioner argued that the notification was unjustified as no such special circumstances existed and no recommendation was made by the GST Council.

The Court acknowledged the legal framework under Section 168A, which empowers the Central Government to extend limitation periods subject to GST Council recommendation and special circumstances. However, the Court did not decide on the validity of the notification, as the matter was disposed of on procedural grounds related to personal hearing.

Issue (d): Appropriate reliefs and directions

Considering the binding precedent of the Division Bench and the submissions of the parties, the Court granted relief by setting aside the impugned order dated 29.04.2024 and remitting the matter to the Assessing Officer for fresh adjudication after providing personal hearing to the petitioner. The Court directed the petitioner to appear before the Assessing Officer on 30th June 2025 and mandated the Assessing Officer to pass fresh orders within three months thereafter or within the limitation period, whichever is later.

3. SIGNIFICANT HOLDINGS

The Court held, verbatim:

"Without going into the merit of the case, this Court sets aside the impugned order dated 29.04.2024 (Annexure 'P2') passed by Respondent No. 3 with respect to the period 2018-2019."

"The matter is remitted to the Respondent No. 3 with a direction that he would give personal hearing to the petitioner through its authorized representative and thereafter shall pass orders."

"The petitioner to appear before the Assessing Officer on 30th June, 2025 whereafter the Assessing Officer shall pass the orders within three months or within the limitation period provided, if not expired, whichever falls later."

The core principle established is the mandatory requirement of granting a personal hearing under Section 75(4) of the CGST Act before passing an assessment order, reinforcing the principle of natural justice. Failure to provide such opportunity renders the order liable to be set aside and remitted for fresh adjudication.

The Court refrained from adjudicating on the limitation period and validity of extension notifications, leaving these issues open for determination by the Assessing Officer in the remitted proceedings.

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