Ex parte GST demand u/s 73 quashed for denying meaningful personal hearing and violating natural justice

HC held that the assessment proceedings suffered from violation of principles of natural justice. The authority fixed the last date for filing reply and the date of personal hearing on the same day, contrary to the binding administrative instructions, thereby denying effective opportunity of defence. Despite prior notices, the manner of scheduling deprived the assessee of a meaningful hearing before passing an ex parte order imposing substantial tax, interest and penalty under section 73 of the GST Act. Holding that personal hearing is mandatory before an adverse order, HC set aside the impugned orders and remanded the matter for fresh consideration in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether fixation of the same date for filing reply and for personal hearing in proceedings under section 73 of the GST Act, and passing of an ex parte order without effective hearing, violates the principles of natural justice.

1.2 Whether the appellate authority's dismissal of the appeal without recording independent reasons and without dealing with the grounds of appeal and written submissions violates the principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of assessment order where reply due date and hearing date are identical and ex parte order is passed without effective hearing

Legal framework (as discussed)

2.1 The proceedings arose from a notice in ASMT-10 under Rule 99 of the CGST Rules and a subsequent notice under section 73 of the GST Act proposing demand of tax, interest under section 50 and penalty. The Court considered principles of natural justice in light of prior decisions and an Office Memo of the Commissioner of Commercial Tax dated 12.01.2024, explicitly stating that the date for submission of reply and date of personal hearing cannot be the same.

2.2 The Court referred to its own earlier decisions holding that an assessee is not required to request for personal hearing, and that it is mandatory for the Assessing Authority to afford such opportunity before passing an adverse order, with reference also made to decisions of the Supreme Court in Nelson Motis v. Union of India and State Bank of India v. Rajesh Agarwal & Others.

Interpretation and reasoning

2.3 The record showed that: (i) notice in ASMT-10 directed reply by 26.04.2023, which was not complied with; (ii) notice under section 73 dated 17.09.2023 fixed 10.10.2023 as the last date for filing reply and on the same date fixed personal hearing; (iii) a reminder dated 02.11.2023 again fixed a common date, 09.11.2023, both for filing reply and personal hearing; (iv) the petitioner submitted a reply seeking further time, but no further notice fixing any fresh date of hearing was issued and an ex parte order confirming tax, interest and penalty was passed on 29.12.2023.

2.4 The Court held that fixation of the date for submission of reply and the date of personal hearing on the same day is contrary to the Commissioner's Office Memo dated 12.01.2024 and is inconsistent with the requirements of affording a real and effective opportunity of hearing.

2.5 Applying the principle that an assessee need not specifically request a personal hearing and that the Assessing Authority is under a mandatory obligation to provide such hearing before passing an adverse order, the Court found that no meaningful opportunity of hearing had been afforded. The ex parte nature of the order, passed without fixing any further hearing date after the petitioner's reply seeking time, reinforced this conclusion.

Conclusions

2.6 The impugned assessment order passed under section 73, having been made by fixing the same date for reply and hearing and by passing an ex parte order without granting an effective opportunity of personal hearing, was held to be in violation of the principles of natural justice and unsustainable in law.

Issue 2: Validity of appellate order passed without recording reasons or dealing with grounds of appeal

Legal framework (as discussed)

2.7 The Court examined the requirement that an appellate authority pass a reasoned order, with reference to the judgment of the Supreme Court in Assistant Commissioner, Commercial Tax v. Shukla & Brothers, wherein it was specifically held that absence of reasons violates the principles of natural justice.

Interpretation and reasoning

2.8 The record disclosed that the first appellate authority dismissed the appeal against the assessment order without recording its own reasons and without considering or dealing with the specific grounds of appeal and the written submissions filed by the petitioner.

2.9 In light of the principle stated in Shukla & Brothers, the Court held that an order bereft of reasons and not reflecting consideration of the grounds urged cannot satisfy the requirement of a fair hearing and violates the principles of natural justice.

Conclusions

2.10 The appellate order, being non-speaking and unreasoned, and having failed to consider the grounds of appeal and written submissions, was held to be violative of the principles of natural justice and therefore unsustainable.

Overall disposition

2.11 In view of the above violations of natural justice at both the assessment and appellate stages, the Court quashed the impugned assessment and appellate orders.

2.12 The matter was remanded to the jurisdictional authority (Joint Commissioner, State Tax, Gautam Buddha Nagar) for fresh decision in accordance with law, after granting due and effective opportunity of hearing to all stakeholders.

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