2024 (2) TMI 188 - HC - GST

Violation of principles of natural justice - opportunity of personal hearing was not afforded to the petitioner - wrongful availment of input tax credit against bogus tax invoices - HELD THAT - From a bare reading of the order dated August 10, 2021 passed by the Respondent No. 3 it is palpably clear that no opportunity of personal hearing was afforded by the Respondent No. 3 to the petitioner, which is a statutory obligation under Section 75(4) of the UPGST Act, 2017. Furthermore, the Respondent No. 2, while dismissing the appeal failed to correct this glaring impropriety in its order dated September 26, 2022. These orders cannot be allowed to pass through the legislative barriers of natural justice, erected to safeguard individual rights and prevent abuse of power. Let there be a writ of certiorari issued against the order dated August 10, 2021 passed by the Respondent No. 3 and order dated September 26, 2022, passed by the Respondent No. 2. These orders are quashed and set aside. Consequential relief to follow. The Respondent No. 2 is directed to grant an opportunity of personal hearing to the petitioner and thereafter pass a reasoned order in accordance with the law within a period of two months from date. This writ petition is, accordingly, allowed.

Summary

Issues Involved:
1. Whether the petitioner was denied an opportunity of personal hearing as mandated under Section 75(4) of the UPGST Act, 2017.
2. Whether the orders passed by the Respondent No. 3 and upheld by the Respondent No. 2 violated principles of natural justice.
3. Whether the writ petition is maintainable despite the availability of an alternative remedy under Section 107 of the UPGST Act, 2017.

Summary:

Issue 1: Opportunity of Personal Hearing
The petitioner, M/S K.J. Enterprises, contended that they were not afforded an opportunity of personal hearing, which is a mandatory requirement under Section 75(4) of the UPGST Act, 2017. The court emphasized that the statutory language of Section 75(4) clearly mandates that an opportunity of hearing must be granted either upon request by the person chargeable with tax or penalty or when an adverse decision is contemplated against such person. The court underscored the disjunctive nature of the word "or" in the statute, which provides flexibility and choice, ensuring that personal hearing is a fundamental aspect of procedural fairness and natural justice.

Issue 2: Violation of Principles of Natural Justice
The court referred to multiple precedents, including Bharat Mint and Allied Chemicals v. Commissioner Commercial Tax and Others, and Mohini Traders v. State of U.P. and Others, which reiterated the necessity of providing an opportunity for personal hearing as contemplated under Section 75(4) of the UPGST Act, 2017. The court also cited the Supreme Court's decision in Dharampal Satyapal Limited v. Deputy Commissioner of Central Excise, Guhati and Others, which upheld the importance of personal hearing before making any decision that may result in civil consequences. The court found that the Respondent No. 3 did not afford the petitioner an opportunity of personal hearing before passing the order dated August 10, 2021, and the Respondent No. 2 failed to correct this impropriety while dismissing the appeal.

Issue 3: Maintainability of the Writ Petition
The court addressed the respondents' argument that the writ petition was not maintainable due to the availability of an alternative remedy under Section 107 of the UPGST Act, 2017. The court held that the availability of an alternative remedy is not a complete bar to entertaining a writ petition under Article 226 of the Constitution of India, especially when there is a gross violation of principles of natural justice. The court found that the impugned orders were passed without affording the petitioner an opportunity of personal hearing, thus violating the principles of natural justice.

Conclusion:
The court issued a writ of certiorari quashing the orders dated August 10, 2021, passed by the Respondent No. 3, and September 26, 2022, passed by the Respondent No. 2. The court directed the Respondent No. 2 to grant an opportunity of personal hearing to the petitioner and thereafter pass a reasoned order in accordance with the law within a period of two months. The writ petition was allowed.