2024 (11) TMI 1074 - HC - GST

Violation of principles of natural justice - petitioner was completely denied opportunity of oral hearing before the Assessing Authority - challenge to order whereby demand has been raised against the present petitioner - 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. 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 impugned order dated July 27, 2024 is set aside. The matter is remitted to the respondent no.2/Deputy Commissioner, State Tax, Sector-1, Basti, Gorakhpur to issue a fresh notice to the petitioner within a period of two weeks from today - Petition allowed.

Summary

Issues:
Challenge to order passed by Deputy Commissioner for tax period April 2019 to March 2020 - Denial of opportunity of oral hearing before the Assessing Authority - Interpretation of Section 75(4) of the U.P. GST Act, 2017 - Effect of petitioner declining opportunity of hearing - Principle of natural justice in assessment orders.

Analysis:

The petitioner challenged an order passed by the Deputy Commissioner for the tax period April 2019 to March 2020, contending that he was denied the opportunity of oral hearing before the Assessing Authority. The main argument raised was that the petitioner was completely denied the opportunity of oral hearing as the Assessing Authority did not provide any opportunity for personal hearing as required by law. The petitioner relied on Section 75(4) of the U.P. GST Act, 2017, and cited previous court decisions to support the claim that the Assessing Authority was bound to afford an opportunity of personal hearing before passing an adverse assessment order. The disputed tax demand of about Rs. 1 crore was highlighted as being adverse to the petitioner due to the lack of a hearing opportunity.

The counsel for the revenue argued that the petitioner was denied the opportunity of hearing because he had declined the option for personal hearing when replying to the show-cause notice online. It was contended that the petitioner's choice to mark 'No' against the option for personal hearing meant that he could not now claim any error in the subsequent order passed against him.

The court analyzed Section 75(4) of the Act, which mandates that an opportunity of hearing shall be granted upon a written request from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person. The court agreed with the precedent set by a coordinate bench in a previous case, emphasizing that the Assessing Authority must provide an opportunity for personal hearing before passing an adverse order, regardless of the petitioner's initial choice to decline a hearing.

Furthermore, the court stressed the importance of observing the principles of natural justice in cases involving heavy civil liabilities, stating that minimal opportunity of hearing is essential to ensure a fair process. Granting such an opportunity not only upholds natural justice but also allows for reasoned orders that serve the interest of justice and facilitate better appreciation at subsequent stages, such as appeals.

Consequently, the court allowed the writ petition, set aside the impugned order, and remitted the matter back to the Deputy Commissioner to issue a fresh notice to the petitioner within two weeks. The petitioner was directed to appear before the authority for expeditious proceedings, emphasizing the necessity of providing a fair opportunity for hearing in such matters.