GST officer serving hearing notice with show cause notice doesn't indicate bias or violate natural justice principles

Calcutta HC dismissed a petition challenging an order under Section 73 of the WBGST/CGST Act, 2017. The petitioner argued that serving a notice in Form GST DRC-01A before the show cause notice indicated predetermined bias. The court found no violation of natural justice, noting that the proper officer provided adequate opportunity to respond to the show cause notice and personal hearing, which the petitioner failed to utilize. The court held that notifying the hearing date with the show cause notice does not render it invalid or indicate predetermination. The petition was disposed of without interference.

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1. ISSUES PRESENTED and CONSIDERED

- Whether the issuance of a show cause notice simultaneously with the opportunity of personal hearing indicates that the proper officer had a predetermined mind to pass an adverse order against the petitioner, thereby violating principles of natural justice.

- Whether the proper officer was required to await the petitioner's reply to the show cause notice before affording an opportunity of personal hearing under Section 75(4) of the WBGST/CGST Act, 2017.

- Whether the petitioner's claim of non-receipt or lack of knowledge of the notices and order prior to January 2025 is tenable given the procedural history and portal usage.

- Whether the petitioner's failure to avail the opportunity of personal hearing disentitles it from challenging the impugned order.

- The scope and application of Section 75(4) of the WBGST/CGST Act, 2017, particularly the interpretation of the term "contemplate" in the context of granting opportunity of hearing.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Predetermination of Mind by Issuing Show Cause and Hearing Opportunity Simultaneously

Relevant Legal Framework and Precedents: Section 75(4) of the WBGST/CGST Act mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or where any adverse decision is contemplated against such person. The petitioner relied on an unreported judgment of the Hon'ble High Court of Chhattisgarh (Mahindra & Mahindra Limited) which held that personal hearing should not be afforded prior to receipt of reply to the show cause notice, implying predetermination if done otherwise.

Court's Interpretation and Reasoning: The Court examined the timing and sequence of the notices and opportunity of hearing. It found that the petitioner was afforded an opportunity to respond to the show cause notice before the personal hearing date and that the personal hearing was scheduled after the response deadline. The Court emphasized that the word "contemplate" in Section 75(4) does not imply that the proper officer has made up its mind to pass an adverse order but only that an adverse decision is under consideration. Reliance was placed on the dictionary definition from Black's Law Dictionary which defines "contemplate" as "to view or consider with continued attention" and not to mean a concluded decision.

Key Evidence and Findings: The Court noted that the show cause notice was issued on 25th April 2024, preceded by a pre-show cause notice dated 19th December 2023, and the opportunity of hearing was scheduled after the petitioner's reply could be submitted. The petitioner did not dispute the sequence of these notices or the filing of returns during the period.

Application of Law to Facts: The Court held that issuing a notice of personal hearing simultaneously with the show cause notice does not amount to predetermination if the hearing is scheduled after the petitioner's reply. The proper officer's conduct was consistent with statutory requirements and principles of natural justice.

Treatment of Competing Arguments: The petitioner's contention that the opportunity of hearing should only be granted after receipt of the reply was rejected. The Court distinguished the Chhattisgarh High Court case by noting that in that case, the personal hearing was afforded before the reply deadline, whereas here it was after. The petitioner's argument that the simultaneous issuance indicated bias was not accepted.

Conclusion: No violation of natural justice or predetermination was found in affording the opportunity of hearing simultaneously with the show cause notice.

Issue 2: Petitioner's Claim of Non-Receipt or Lack of Knowledge of Notices and Orders

Relevant Legal Framework: The petitioner claimed ignorance of the notices and order until January 2025 due to the notices being uploaded in the "additional notices and orders" section of the portal, allegedly causing the petitioner to miss them.

Court's Interpretation and Reasoning: The Court observed that the petitioner did not deny operating the portal or filing returns since December 2023. Given the procedural timeline and that the order was not passed abruptly but after multiple notices and opportunities to respond, the Court found it difficult to accept the petitioner's claim of ignorance.

Key Evidence and Findings: The petitioner's own admission that the change of accountant in January 2025 led to discovery of the notices and order was noted. However, the petitioner's continued portal activity during the relevant period undermined the claim of non-receipt.

Application of Law to Facts: The Court inferred that the petitioner had constructive knowledge of the proceedings and that mere failure to notice the uploaded documents did not absolve the petitioner of responsibility.

Treatment of Competing Arguments: The petitioner's argument was considered but found insufficient to warrant interference with the order.

Conclusion: The petitioner's claim of lack of notice was rejected as untenable.

Issue 3: Petitioner's Failure to Avail Opportunity of Personal Hearing

Relevant Legal Framework: The statutory scheme envisages that an opportunity of personal hearing is a procedural safeguard. However, failure to avail this opportunity may limit the petitioner's rights to challenge the order.

Court's Interpretation and Reasoning: The Court noted that the petitioner did not appear for the hearing despite being notified and having the opportunity. It held that non-availment of this opportunity disentitles the petitioner from questioning the procedural propriety of the hearing.

Key Evidence and Findings: The record showed that the hearing date was communicated and that the petitioner failed to appear.

Application of Law to Facts: The Court applied the principle that procedural safeguards must be utilized by the aggrieved party to claim protection.

Treatment of Competing Arguments: The petitioner's failure to appear was not excused or justified.

Conclusion: The petitioner cannot challenge the order on grounds relating to the hearing opportunity having not availed it.

Issue 4: Interpretation of Section 75(4) and Meaning of "Contemplate"

Relevant Legal Framework: Section 75(4) requires granting an opportunity of hearing where an adverse decision is contemplated or upon written request by the person chargeable.

Court's Interpretation and Reasoning: The Court undertook a linguistic and purposive interpretation of "contemplate," relying on Black's Law Dictionary to clarify that "contemplate" means to consider or have in view, not to have concluded or decided. The Court thus rejected the petitioner's submission that the provision implies a fixed adverse decision at the time of hearing notification.

Key Evidence and Findings: The statutory text and dictionary meaning were the primary sources.

Application of Law to Facts: The Court applied this interpretation to hold that the proper officer's scheduling of a hearing does not indicate a predetermined adverse order.

Treatment of Competing Arguments: The petitioner's argument that "contemplate" means a decided adverse order was rejected as unsupported.

Conclusion: The Court clarified the scope of Section 75(4) and the meaning of "contemplate" in the context of procedural fairness.

3. SIGNIFICANT HOLDINGS

"The word 'contemplate' as used in Section 75(4) of the WBGST/CGST Act does not mean or include that the proper officer had made up its mind to pass an adverse order against the petitioner. It means to view or consider with continued attention; to regard thoughtfully; to have in view as contingent or probable as an end or intention."

"Issuing a notice of personal hearing simultaneously with the show cause notice, when the hearing is scheduled after the date for furnishing the response, does not render the show cause notice bad nor indicate predetermination by the proper officer."

"The petitioner's failure to avail the opportunity of personal hearing disentitles it from challenging the procedural propriety of the hearing or the impugned order on that ground."

"The petitioner's claim of ignorance of the notices and order, despite operating the portal and filing returns during the relevant period, is untenable and does not justify interference with the order."

"The multi-tiered adjudicating process under the Act provides a remedy by way of appeal. The petitioner is directed to prefer an appeal within four weeks, which shall be heard by the appellate authority in accordance with statutory formalities."

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