Personal Hearing under GST

[VIGNESH]

Sir.

1. For cases covered under section 62 (Assessment of non-filers of returns) opportunity of personal hearing to be provided or not?

2. Timelimit has been amended to 60 days from 30 days and further period of 60 days allowed by the Finance Act 2023 is it notified? kindly help

[KASTURI SETHI]

Sh.Vignesh Ji,

The best judgement assessment is not 'the best' in the absence of personal hearing. Personal hearing is required even for the cases covered under Section 62 of the CGST Act. Peruse the following judgements :-

2021 (5) TMI 453 - TELANGANA HIGH COURT GOLDEN MESH INDUSTRIES Versus ASSISTANT COMMISSIONER OF STATE TAX

Assessment of non-filers of GSTR-3B returns — Best judgment Method adopted by Department by multiplying three times monthly SGST tax and imposing 100% penalty without indicating provision of law arbitrary and contrary to provisions of Central Goods and Services Tax Act, 2017

The Supreme Court Bench comprising Hon’ble Mr. Justice Sanjay Kishan Kaul and Hon’ble Mr. Justice Hrishikesh Roy on 13-8-2021 dismissed the Petition(s) for Special Leave to Appeal (C) No. 11935 of 2021 filed by Assistant Commissioner State Tax against the Judgment and Order dated 31-3-2021 of Telangana High Court in Writ Petition No. 7789 of 2021 reported as 2022 (57) G.S.T.L. 108 (Telangana)(Golden Mesh Industries v. Assistant Commissioner, State Tax). While dismissing the petition, the Supreme Court passed the following order :

“Reading of the impugned order shows that in para 5, the Counsel for the Department did not answer the questions posed by the Court, i.e., in what manner is three times the monthly SGST tax taken to be the principal and 100% penalty imposed. This is apparent from para 5.

Learned Counsel now contends that there is an explanation for the same but the matter was disposed of on the first date itself and possibly the Counsel could not assist the Court.

Aforesaid being the position, it is for the petitioner to file an application seeking review of the order and not preferring the SLP.

The special leave petition is dismissed with the aforesaid liberty.

Pending application stands disposed of.”

The Telangana High Court in its impugned order had held that the best judgment method adopted by the Department for non-filers of GSTR-3B returns by multiplying three times the monthly SGST tax and imposing 100% penalty without indicating the provision of the law, was arbitrary and contrary to the provisions of Central Goods and Services Tax Act, 2017. The assessment done in such manner was quashed and the Department was directed to pass a fresh reasoned order after issuing notice to the assessee indicating the method of the assessment and after granting him the opportunity of hearing.

[Assistant Commissioner, State Tax v. Golden Mesh Industries - 2022 (4) TMI 918 - SC ORDER]

[GUNASEKARAN K]

If the assessee fails to furnish the return within 15 days of issue of notice under section 46 then the Proper Officer may assess the tax liability in to the best of his judgment, taking into account all the relevant material available on record, and issue an assessment order. This is also known as ‘best judgment assessment’.

It can be completed without giving notice of hearing to the Non filer assessee.

Another important aspect is, in case an order of best judgment is passed under section 62 and returns are not filed within 30 days, the order becomes final and even if returns are filed subsequently, the order CANNOT be withdrawn.

Only remedy will be to file such returns and also prefer appeal under section 107.

[VIGNESH]

Thank u Guruji for clarrifying doubt (1) kindly comment on doubt (2) also! waiting for ur reply

[Sadanand Bulbule]

Dear Sir

Please refer Section 75[4] of the GST Act which reads as under:

(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, orwhere any adverse decisionis contemplated against such person.

As such, an action under Section 62 for assessment of non-filers is also an adverse decision. So an opportunity of hearing is a must before the proposed action is confirmed, even if there is no such indication from the concerned person. It is the obligatory duty of the authority and it is losing nothing by doing so. There is no discretion as far as the principles of natural justice are concerned. It is no more a debatable issue.

[KASTURI SETHI]

Regarding doubt no.2 (Q.No.2). As per TMI the effective is 1.10.23. Relevant contents are extracted below :

Section 62 : Assessment of non-filers of returns.

(2) Where the registered person furnishes a valid return within ¹[sixty days] of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue.

1. Substituted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-10-2023 before it was read as, "thirty days"

[KASTURI SETHI]

Personal hearing is mandatory even if the Noticee says 'NO' to personal Hearing -----Allahabad High Court reported as in the case of Mohini Traders - 2023 (6) TMI-531-Allahabad High Court. (TMI Issue ID 438957).

[Padmanathan KV]

Natural justice to be followed.

The "60 days" substituted w.e.f. 1-10-2023 as per TMI.

AI Summary

Personal hearing requirement under GST: hearing required before best-judgment assessment; return withdrawal period extended by amendment. Personal hearing is required before confirming best judgment assessments under Section 62; assessments made without explaining the assessment method or affording hearing have been held arbitrary and ordered to be re made after notice and opportunity of hearing. The Finance Act, 2023 extended the period within which filing a valid return will cause an assessment order under Section 62 to be deemed withdrawn, while preserving liability for interest and late fee.