Adjudication set aside for breach of natural justice for denying personal hearing and issuing non-speaking order; matter remitted

HC found that the adjudication breached principles of natural justice by denying a personal hearing and issuing a non-speaking, mechanical order. The impugned orders were set aside and the matter remitted to the competent authority to proceed afresh from the stage of the notice, affording an opportunity of hearing and ensuring compliance with statutory scheme. Petition disposed of by way of remand.

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ISSUES PRESENTED AND CONSIDERED

1. Whether an adjudication order under the CGST Act that is adverse to the assessee can be passed without affording an opportunity of personal hearing where an adverse decision is contemplated.

2. Whether non-compliance with sub-section (4) of Section 75 of the CGST Act and attendant procedural irregularities (including issuance of a non-speaking, mechanical order) render the resultant demand/assessment unsustainable and require quashing and remittance for fresh proceedings.

3. Whether a coordinate bench decision on identical legal questions can be applied to dispose of the present petition and whether the alternate remedy/effect of appellate proceedings affects the remedy under writ jurisdiction where civil consequences follow from the impugned order.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Requirement of personal hearing where an adverse decision is contemplated

Legal framework: Sub-section (4) of Section 75 of the Central Goods and Services Tax Act mandates that the Assessing Authority shall afford an opportunity of personal hearing where it is requested in writing by the assessee or where any adverse decision is contemplated against such person. The general principle that statutory requirements prescribing the manner of doing an act must be complied with ("done in that way or not at all") is applied.

Precedent Treatment: The Court follows the reasoning in a recently cited apex authority emphasizing the mandatory nature of statutory procedural prescriptions (extracts from Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors. and earlier authorities such as A. R. Antulay and Sharif-ud-Din v. Abdul Gani Lone). A coordinate bench decision confronting identical statutory compliance was followed.

Interpretation and reasoning: The mandate of sub-section (4) is interpreted as requiring a personal hearing in either of the two specified circumstances: (a) a written request by the assessee, or (b) when an adverse decision is contemplated. If an order draws conclusions adverse to the assessee, the second circumstance is triggered irrespective of a written request. The Court emphasizes that where law prescribes a specific procedure for orders that affect civil rights, non-compliance defeats the statutory objective and is to be treated as mandatory.

Ratio vs. Obiter: Ratio - It is a legal necessity under Section 75(4) that a personal hearing be afforded when an adverse decision is contemplated; failure to do so vitiates the assessment. Obiter - General observations on the salutary nature of affording hearings in administrative adjudication as a rule of fair procedure.

Conclusions: The Court concludes that personal hearing was mandated in the present circumstances and that omission to provide it renders the impugned order procedurally defective and unsustainable.

Issue 2: Effect of procedural irregularities and non-speaking/mechanical orders on validity of demand

Legal framework: Principles of natural justice and statutory procedural mandates under the CGST Act (particularly Section 75) govern the validity of assessment orders that produce civil consequences (demand/ recovery). Administrative orders must be speaking and reflect reasons; mechanical disposal without addressing material issues is impermissible.

Precedent Treatment: The Court relied on established authorities that treat mandatory procedural safeguards as integral to the validity of orders affecting civil rights, and on the coordinate bench decision which applied these principles to set aside assessments where hearings were not afforded. The apex authority cited reinforces the mandatory character of statutory procedural requirements.

Interpretation and reasoning: The Court reasons that the combined effect of denial of hearing and issuance of a non-speaking, mechanical order results in denial of opportunity to defend and violates statutory procedure. Where the order leads to recovery proceedings under Section 79 (civil consequence), the requirement of hearing is more compelling. The Court rejects departmental reliance on an earlier decision where facts differed and where the court had not gone into merits; here, the petitioner had exhausted alternate remedies and the appeal was rejected on limitation grounds, reinforcing the necessity for judicial intervention.

Ratio vs. Obiter: Ratio - Procedural irregularities amounting to denial of personal hearing and non-speaking adjudication vitiate an assessment that has civil consequences; such orders must be set aside. Obiter - Remarks distinguishing earlier departmental precedents not on par with present facts.

Conclusions: The impugned assessment and related recovery notices are legally unsustainable on account of procedural infirmities and are set aside; the matter is remitted for fresh proceedings from the stage of the notice, with directions to comply with statutory mandates including affording personal hearing.

Issue 3: Application of coordinate bench decision and availability of alternate remedies

Legal framework: Writ jurisdiction permits relief where fundamental statutory mandates are breached and where orders produce civil consequences; the existence of alternate statutory remedies is a factor but does not preclude relief when the alternate remedy is ineffective or exhausted, or where appellate process itself fails on technical grounds (e.g., limitation) without addressing merits.

Precedent Treatment: The Court accepted and applied a coordinate bench decision (Writ Petition M/B 316 of 2025) that held Section 75(4) mandates personal hearing when an adverse order is contemplated and that non-compliance mandates quashing and remittal. An earlier decision relied upon by the Department was distinguished on facts and on the narrower scope in which that earlier bench had proceeded (relegation to alternate remedy without adjudication on the mandatory nature of Section 75(4)).

Interpretation and reasoning: The Court treated the coordinate bench ruling as directly applicable to the legal question raised and found the present facts comparable - i.e., an adverse order passed without personal hearing and resulting civil consequences. The Court considered the efficacy of alternate remedies: the petitioner had invoked the competent authority and appellate remedy which was dismissed on limitation, demonstrating the inadequacy of alternate remedies to cure the procedural defect. The Court thus exercised writ jurisdiction to set aside the order rather than relegating the petitioner to alternate remedies.

Ratio vs. Obiter: Ratio - A coordinate bench decision on the mandatory nature of Section 75(4) is applicable to similar factual and legal situations; where alternate remedies are ineffective or exhausted, writ relief is appropriate. Obiter - Observations distinguishing other departmental decisions not on parity of facts.

Conclusions: The Court applied the coordinate bench decision to dispose of the petition, set aside the impugned orders, and remitted the matter to the competent authority to proceed afresh from the stage of the notice, thereby preserving the requirement of personal hearing and proper adjudicatory process.

Relief and Outcome

The Court set aside the impugned orders and remitted the matter to the competent authority to proceed de novo from the stage of the notice, directing compliance with Section 75(4) and associated procedural mandates; no order as to costs was made.

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