2023 (10) TMI 1515 - HC - GST

Violation of principles of natural justice - denial of fair opportunity of personal hearing before the Assessing Authority as required under Section 75(4) of the U.P. GST Act 2017 - validity of adverse assessment order - HELD THAT - Once it has been laid down by way of a principle of law that a person/assessee is not required to request for opportunity of personal hearing and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order the fact that the petitioner may have signified No in the column meant to mark the assessee s choice to avail personal hearing would bear no legal consequence. Even otherwise in the context of an assessment order creating heavy civil liability observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms. Here it is noted the impugned order itself has been passed on 26.12.2022. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter the explanation furnished may be rejected and demand created. Not only such opportunity would ensure observance of rules of natural of justice but it would allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage if required. The matter is remitted to the respondent no.2/Deputy Commissioner State Tax Sector-1 Raebareli to issue a fresh notice to the petitioner within a period of two weeks from today - petition allowed by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the petitioner was denied a fair opportunity of personal hearing before the Assessing Authority, as required under Section 75(4) of the U.P. GST Act, 2017, and whether this denial invalidates the adverse assessment order issued against the petitioner.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework is Section 75(4) of the U.P. GST Act, 2017, which mandates that an opportunity for a hearing must be granted when a request is received in writing from the person chargeable with tax or penalty, or when any adverse decision is contemplated against such person. The Court referenced the precedent set in Bharat Mint & Allied Chemicals Vs. Commissioner Commercial Tax, which emphasized the mandatory nature of providing a personal hearing before passing an adverse assessment order.

Court's Interpretation and Reasoning

The Court interpreted Section 75(4) to mean that it is obligatory for the Assessing Authority to offer a personal hearing to the assessee before issuing an adverse order. The Court agreed with the interpretation in Bharat Mint & Allied Chemicals, stating that the obligation to provide a hearing is not contingent upon the assessee's request. The Court emphasized that the principle of natural justice requires that an opportunity for a hearing be provided to ensure fairness and transparency in the assessment process.

Key Evidence and Findings

The key evidence in this case was the notice issued to the petitioner, which lacked any details regarding the date, time, and venue for a personal hearing, as indicated by the "NA" entries in the relevant columns. This omission was central to the petitioner's argument that they were denied an opportunity for oral representation, which is a critical aspect of natural justice.

Application of Law to Facts

The Court applied the legal principles from Section 75(4) and the Bharat Mint & Allied Chemicals case to the facts, concluding that the absence of a scheduled personal hearing in the notice constituted a denial of the mandatory opportunity for a hearing. This procedural lapse rendered the assessment order invalid as it contravened the statutory requirement and principles of natural justice.

Treatment of Competing Arguments

The petitioner argued that the lack of a personal hearing violated their rights under the U.P. GST Act and the principles of natural justice. The respondent did not provide a counter-argument that effectively addressed the statutory requirement for a hearing. The Court found the petitioner's arguments compelling and consistent with established legal principles, leading to the conclusion that the assessment order was procedurally flawed.

Conclusions

The Court concluded that the petitioner was unjustly denied a personal hearing, which is a fundamental procedural right under the U.P. GST Act. Consequently, the assessment order was set aside, and the matter was remitted for reconsideration with proper observance of the hearing requirement.

SIGNIFICANT HOLDINGS

The Court held that the opportunity for a personal hearing is a mandatory procedural step under Section 75(4) of the U.P. GST Act, 2017, especially when an adverse decision is contemplated. The Court stated: "An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person." This holding reinforces the principle that procedural fairness and the right to be heard are integral to the assessment process.

The final determination was that the impugned assessment order dated 26.12.2022 was set aside due to the procedural violation, and the matter was remitted to the Deputy Commissioner, State Tax, to issue a fresh notice and provide a proper opportunity for a hearing.