2025 (7) TMI 621 - HC - GST

GST Order quashed for violating natural justice under Section 75(4) - show-cause notice lacked attachments and hearing denied

Gujarat HC quashed GST Order-in-Original dated 19.01.2024 for violating principles of natural justice. The show-cause notice dated 06.01.2024 in Form GST ... Violation of principles of natural justice - order passed without considering the reply and without granting opportunity of personal hearing to the petitioner though the same was prayed in the reply - HELD THAT:- It appears that it is not in dispute that the show-cause notice dated 06.01.2024 in Form GST DRC-01 is without any attachment containing the reasons. It is also apparent from the record that no opportunity was granted by the respondent No. 2 to the petitioner as provided under Section 75(4) of the GST Act. Therefore, without further going into the merits of the matter and only in view of breach of principles of natural justice committed by the respondent No. 2 while issuing the impugned notice dated 06.01.2024 and passing the impugned Order-in-Original dated 19.01.2024, the matter is required to be remanded back to the respondent No. 2 to pass a fresh de-novo order after giving opportunity of hearing to the petitioner in accordance with law. The impugned Order-in-Original dated 19.01.2024 is quashed and set aside and respondent No. 2 is directed to provide an attachment to the show-cause notice dated 06.01.2024 to the petitioner within a period of four weeks from the date of receipt of the copy of this order so as to enable the petitioner to file a detailed reply to such show-cause notice and thereafter, after granting an opportunity of hearing to the petitioner, pass a fresh denovo order in accordance with law. Such exercise shall be completed within a period of twelve weeks from the date of receipt of the copy of this order. Petition disposed off. 1. ISSUES PRESENTED and CONSIDERED- Whether the show-cause notice issued under Form GST DRC-01 dated 06.01.2024 was validly served upon the petitioner, particularly regarding the attachment containing the reasons for issuance of the notice.- Whether the Order-in-Original passed under Section 74 of the Central Goods and Services Tax Act, 2017 ('GST Act') dated 19.01.2024 was passed after considering the petitioner's reply and after granting an opportunity of personal hearing as mandated under law.- Whether the rejection of the petitioner's appeal by the Appellate Authority on the ground of delay, despite submission of a medical certificate explaining the delay, was justified under Section 107(4) of the GST Act.- Whether the Input Tax Credit claimed by the petitioner on purchase from a supplier whose GST registration was cancelled was rightly disallowed.2. ISSUE-WISE DETAILED ANALYSISValidity of Service of Show-Cause Notice and AttachmentsThe legal framework mandates that a show-cause notice under GST must be served along with the reasons or attachments detailing the basis of the notice, ensuring the recipient is fully informed to respond effectively. The petitioner contended that the show-cause notice dated 06.01.2024 in Form GST DRC-01 was served without the requisite attachments containing the reasons, thereby violating the principles of natural justice.The Court examined the record and found no evidence that the attachments were provided to the petitioner. This omission was significant as it deprived the petitioner of the opportunity to understand the grounds of the allegation fully and to prepare an adequate reply. The Court emphasized that such procedural lapses undermine the fairness of the proceedings and are contrary to the requirements under the GST Act.Opportunity of Hearing Prior to Passing Order-in-OriginalSection 75(4) of the GST Act requires that before passing an order, the authority must provide the person concerned an opportunity of being heard. The petitioner submitted that despite expressly requesting a personal hearing in the reply dated 10.01.2024, no such opportunity was granted before the Order-in-Original dated 19.01.2024 was passed.The respondents argued that the order was passed after considering the petitioner's reply and that sufficient opportunity was granted. However, the Court found no record of any personal hearing being conducted or offered. The absence of such an opportunity was held to be a breach of the principles of natural justice, which are fundamental to administrative adjudication.Rejection of Appeal on Grounds of Delay Despite Medical GroundsThe petitioner's appeal against the Order-in-Original was rejected by the Appellate Authority on the ground of delay of 71 days beyond the prescribed period under Section 107(4) of the GST Act. The petitioner submitted a medical certificate to justify the delay.The Court noted that the issue of delay was considered by the Appellate Authority strictly in accordance with statutory provisions. However, since the primary order itself was set aside on procedural grounds, the Court did not delve into the merits of the delay issue. The Court's direction to remand the matter effectively rendered the appeal decision moot, as the petitioner would have the opportunity to contest the matter afresh.Legitimacy of Input Tax Credit Claimed from Supplier with Cancelled GST RegistrationThe respondents contended that the supplier, M/s. K.S. Traders, was not a genuine firm since its GST registration was cancelled effective 01.07.2017, and therefore, the Input Tax Credit claimed by the petitioner was rightly disallowed with interest and penalty.The petitioner produced documentary evidence including tax invoices, transporter's receipts, delivery challans, e-way bills, ledger accounts, and bank statements to prove physical receipt of goods and entitlement to Input Tax Credit. The Court refrained from adjudicating on the substantive merits of this issue in view of procedural irregularities and remanded the matter for fresh consideration after due process.3. SIGNIFICANT HOLDINGS'It is not in dispute that the show-cause notice dated 06.01.2024 in Form GST DRC-01 is without any attachment containing the reasons. It is also apparent from the record that no opportunity was granted by the respondent No. 2 to the petitioner as provided under Section 75(4) of the GST Act.''Without further going into the merits of the matter and only in view of breach of principles of natural justice committed by the respondent No. 2 while issuing the impugned notice dated 06.01.2024 and passing the impugned Order-in-Original dated 19.01.2024, the matter is required to be remanded back to the respondent No. 2 to pass a fresh de-novo order after giving opportunity of hearing to the petitioner in accordance with law.'Core principles established include the inviolability of the principles of natural justice in tax proceedings, specifically the requirement that a show-cause notice must be accompanied by reasons or attachments to inform the recipient adequately, and that an opportunity of hearing must be granted before passing an order affecting the rights of the taxpayer.The Court's final determination was to quash and set aside the impugned Order-in-Original dated 19.01.2024 and to direct the tax authority to provide the missing attachments to the show-cause notice, allow the petitioner to file a detailed reply, grant an opportunity of hearing, and thereafter pass a fresh order within a stipulated timeframe. The appeal rejection order was implicitly set aside by virtue of the remand for fresh adjudication.