2024 (12) TMI 1493 - HC - GST

Violation of principles of natural justice - opportunity of personal hearing not provided - direction to petitioner to pay tax, interest, and penalty - HELD THAT - Considering the nature of relief to the granted, this Court is of the view that notice to the respondent-Bank is not necessary and the same is dispensed with. This Court is of the view that if the respondent Department is not convinced with the reply filed by the petitioner and is in need of any documents, they ought to have called upon the petitioner to produce those relevant documents, by providing an opportunity of personal hearing, without doing so, they cannot straight away slap the petitioner with the impugned order. It is sheer clear that the impugned order not only suffers from violation of principles of natural justice but also against the provisions contemplated under Section 75 (4) of the CGST Act, inasmuch as, in terms of Section 75(4), an opportunity of hearing ought to have been granted, where any adverse decision is contemplated against taxpayer (petitioner in this case). Therefore, this Court is inclined to set aside the impugned order. The impugned order dated 29.04.2024 is set aside and the matter is remanded back to the respondent for fresh consideration - Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the impugned order dated 29.04.2024, directing the petitioner to pay tax, interest, and penalty, was passed in violation of the principles of natural justice.
Whether the respondent's failure to provide a personal hearing to the petitioner before passing the impugned order contravenes Section 75(4) of the CGST Act.
Whether the attachment of the petitioner's bank accounts was justified under the circumstances.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require that a party be given a fair opportunity to present their case. Section 75(4) of the CGST Act mandates that a personal hearing should be granted when an adverse decision is contemplated.
Court's interpretation and reasoning: The court found that the respondent did not provide a personal hearing to the petitioner, which constitutes a violation of the principles of natural justice and Section 75(4) of the CGST Act.
Key evidence and findings: The petitioner responded to the show cause notice with a detailed reply, but the respondent proceeded with the order without a hearing.
Application of law to facts: The court applied the principles of natural justice and Section 75(4) to conclude that the impugned order was issued improperly.
Treatment of competing arguments: The respondent argued that the reply was considered but not acceptable. However, the court emphasized the necessity of a personal hearing.
Conclusions: The court concluded that the impugned order should be set aside due to the procedural deficiencies.

Issue 2: Attachment of Bank Accounts

Relevant legal framework and precedents: The attachment of bank accounts is typically a measure to secure the interest of the revenue, but it must follow due process.
Court's interpretation and reasoning: The court did not specifically address the legality of the bank account attachment but implied that due process was not followed.
Key evidence and findings: The attachment was part of the recovery proceedings initiated without a proper hearing.
Application of law to facts: The court's decision to set aside the impugned order indirectly affects the validity of the bank account attachment.
Treatment of competing arguments: The court focused on the lack of a personal hearing rather than the attachment itself.
Conclusions: The court's decision to set aside the order suggests that the attachment was premature.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The impugned order not only suffers from violation of principles of natural justice but also against the provisions contemplated under Section 75(4) of the CGST Act."
Core principles established: The necessity of a personal hearing before passing an adverse order under the CGST Act; adherence to principles of natural justice.
Final determinations on each issue: The court set aside the impugned order and remanded the matter for fresh consideration, subject to conditions, including a deposit by the petitioner and a mandated personal hearing.

In conclusion, the court emphasized the importance of procedural fairness and adherence to statutory requirements, particularly the need for a personal hearing under Section 75(4) of the CGST Act, before passing an adverse order. The matter was remanded for reconsideration with specific directions to ensure compliance with these principles.

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