The High Court of Bombay has quashed an assessment order issued by the Deputy Commissioner of State Tax citing a serious violation of the principles of natural justice and the denial of a fair personal hearing opportunity to the petitioner.
The case revolved around the writ petition filed by Cowtown Software Design Pvt. Ltd. and its Associate General Manager, Milind Karnik, challenging an order dated 18th August 2023 issued by the Deputy Commissioner of State Tax.
The petitioners argued that the assessment order was in contravention of Section 75(4) of the Central Goods and Service Tax Act, 2017 ( CGST Act ), and deprived them of a fair opportunity to present their case.
The dispute arose following an assessment conducted on the returns of Cowtown Software Design Pvt. Ltd. for the financial year 2017-18. Allegations were raised regarding discrepancies between the Input Tax Credit (ITC) claimed by the petitioner in Form GSTR 3B and the ITC confirmed in Form GSTR 2A.
Despite the petitioner’s request for a personal hearing to address these discrepancies, the Deputy Commissioner of State Tax proceeded to issue an assessment order without affording them the opportunity to present their arguments.
The petitioners, represented by Mr. Kartik Dedhia, along with Mr. Rishabh Jain of M/s.TLC Legal LLP contended that they had explicitly sought a personal hearing in their submissions, as required by Section 75(4) of the CGST Act. The failure to grant this request amounted to a violation of their right to be heard and a denial of natural justice.
The respondent revenue, Union of India and others, represented by Ms. Nitee Punde, Ms. Manda Omle and Mr. Himanshu Takke argued that no personal hearing was required as the petitioner had not selected the option for a personal hearing in the dialogue box provided.
The bench noted that Section 75(4) of the CGST Act mandates granting a personal hearing upon request or when an adverse decision is contemplated against the taxpayer. In this case, the petitioner had explicitly requested a personal hearing in their submissions and the assessment order constituted an adverse decision.
The court further emphasised that the denial of a fair personal hearing amounted to a violation of fundamental principles of natural justice. By proceeding with the assessment order without affording the petitioner an opportunity to present their case, the tax authorities had failed to adhere to due process requirements.
The bench cited the decisions of the Division Bench of Bombay High Court in Kuehne Nagel Private Limited Vs. The State of Maharashtra & Ors., Hydro Pneumatic Accessories India Pvt. Ltd. Vs. The Assistant Commissioner of State Tax, Muland West & Anr. and Mauli Sai Developers Private Limited vs. Union of India and Ors.
In result, the division bench comprising Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla ruled in favour of the petitioners and quashed the assessment order dated 18th August 2023. The court directed the tax authorities to provide Cowtown Software Design Pvt. Ltd. with a fair personal hearing and to reconsider the matter in accordance with the law within four weeks. The bench stressed the importance of upholding principles of natural justice in administrative proceedings. The bench also affirmed that tax authorities shall always ensure that taxpayers are afforded a fair opportunity to present their case before adverse decisions are made.
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