2025 (10) TMI 716 - HC - GST

Dismissal of appeal beyond limitation and order under Section 73 GST without personal hearing violates natural justice; matter remanded

HC held that dismissal of the appeal beyond limitation and passing an order under Section 73 GST without affording personal hearing violated principles of ... Dismissal of appeal being beyond limitation - no opportunity of hearing was granted while passing the order under Section 73 of the GST Act - violation of principles of natural justice - HELD THAT:- It will be appropriate to notice the observations made by the Division Bench of this Court in Mahaveer Trading Company [2024 (3) TMI 334 - ALLAHABAD HIGH COURT] wherein it was held that 'In view of the facts noted above, before any adverse order passed in an adjudication proceeding, personal hearing must be offered to the noticee. If the noticee chooses to waive that right, occasion may arise with the adjudicating authority, (in those facts), to proceed to deal with the case on merits, ex-parte. Also, another situation may exist where even after grant of such opportunity of personal hearing, the noticee fails to avail the same. Leaving such situations apart, we cannot allow a practice to arise or exist where opportunity of personal hearing may be denied to a person facing adjudication proceedings.' Since the aforesaid dictum is applicable in the present facts and circumstances, accordingly, the impugned orders cannot be sustained and the orders dated 11.12.2023 & 09.09.2025 are accordingly quashed. Matter is remanded to the assessing authority to pass fresh order after giving an opportunity of hearing to the petitioner - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudication order passed under Section 73 of the U.P. Goods and Services Tax Act, 2017 without affording an opportunity of personal hearing is sustainable. 2. Whether an appellate order dismissing an appeal as time-barred can stand where the underlying adjudication order is challenged on the ground of non-grant of personal hearing. 3. Whether established procedural protections (including Section 75(4) or analogous provisions requiring opportunity of hearing) and administrative instructions insisting on fixation of personal hearing dates alter the validity of adjudication proceedings where hearing was not fixed or afforded. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of adjudication under Section 73 where no personal hearing was afforded Legal framework: The procedural law under taxing statutes requires that an opportunity of personal hearing be afforded before any adverse assessment/adjudication order is passed. Section 75(4) (as cited in the judgment) mandates granting an opportunity of hearing where a written request is received from the person chargeable with tax or where any adverse decision is contemplated against such person. Precedent treatment: The Division Bench decision relied upon (Mahaveer Trading Company) was followed. That authority held that denial of personal hearing in adjudication proceedings under the GST regime is contrary to procedural requirements and cannot be sustained except in limited circumstances (waiver by noticee or where opportunity was granted but not availed). Interpretation and reasoning: The Court examined the record and found that although the noticee appeared on multiple dates and furnished written replies, no date was fixed for a personal hearing and no oral hearing was afforded prior to passing the adjudication order. The Court treated the mandatory requirement of personal hearing as a fundamental procedural safeguard that cannot be bypassed merely because substantive law has changed or due to maladministration. Administrative guidance (Office Memo) was referenced to demonstrate that systemic failures (use of 'N.A.' instead of fixing hearing dates; setting reply and hearing dates inconsistently; passing orders without appropriate hearing dates) are known and discouraged. Ratio vs. Obiter: Ratio - It is mandatory to afford a personal hearing before passing an adverse adjudication order under the GST regime where an adverse decision is contemplated; absence of such hearing renders the order unsustainable. Obiter - Observations about administrative practices and the particular content of the Office Memo serve as supporting context but are not the primary legal ratio. Conclusion: The adjudication order passed under Section 73 without affording a personal hearing was quashed and set aside. The matter was remanded to the assessing authority to pass a fresh order after giving an opportunity of hearing to the petitioner. Issue 2 - Effect of non-grant of personal hearing on a subsequently dismissed appeal (as time-barred) Legal framework: An appellate consideration cannot be isolated from the validity of the impugned adjudication order; if the underlying adjudication is vitiated for procedural defect (non-grant of personal hearing), the appellate disposal founded upon that adjudication requires reconsideration. Precedent treatment: The Court applied the same principle from the Division Bench authority to the composite relief sought, treating the appeal dismissal (as beyond limitation) as unsustainable where the foundational adjudication itself is void for denial of hearing. Interpretation and reasoning: The Court noted that because the primary adjudicatory order was invalidated on procedural grounds, maintaining an appellate dismissal predicated on that order would be an exercise in futility. The Court therefore quashed both the adjudication order and the appellate dismissal, directing remand for fresh adjudication with hearing. Ratio vs. Obiter: Ratio - Where an adjudication order is quashed for denial of personal hearing, related appellate orders cannot stand and remand for fresh adjudication with hearing is appropriate. Obiter - No detailed analysis of limitation law was undertaken; the decision focused on the procedural infirmity as determinative. Conclusion: The appellate order dismissing the appeal as beyond limitation was also quashed in light of the quashing of the underlying adjudication order, and the matter was remanded for fresh adjudication after hearing. Issue 3 - Scope for proceeding ex parte or without fresh hearing in limited circumstances Legal framework: Procedural law allows adjudicating authorities to proceed ex parte only where the noticee has waived the right to personal hearing or has been granted an opportunity but has failed to avail it. Precedent treatment: The Division Bench authority was followed in recognizing narrow exceptions permitting ex parte or post-opportunity orders; however, routine denial of hearing is impermissible. Interpretation and reasoning: The Court distinguished three situations: (a) where personal hearing is expressly granted and the noticee waives it - the authority may proceed; (b) where hearing is granted but the noticee fails to appear - authority may proceed; (c) where no hearing is fixed and no opportunity is afforded - such practice is unacceptable and vitiates the order. The administrative Office Memo corroborates that systemic practices resulting in failure to fix hearing dates are impermissible. Ratio vs. Obiter: Ratio - Ex parte adjudication is permissible only after an opportunity has been furnished (and then either waived or not availed); mere absence of a hearing date or failure to afford hearing is fatal. Obiter - Administrative recommendations regarding date alignment and form usage are persuasive guidance. Conclusion: The Court held that only in the limited scenarios of waiver or failure to avail an expressly granted hearing may the adjudicating authority proceed without oral hearing; routine denial of an opportunity of personal hearing is impermissible and renders the order liable to be quashed. Relief and Directive Because the mandatory requirement of personal hearing was not complied with, the adjudication order under Section 73 and the appellate dismissal were quashed; the matter was remanded to the assessing authority to pass a fresh order after giving a personal hearing to the noticee in accordance with the procedural requirements and administrative guidance.