In a significant ruling, the Allahabad High Court held that an opportunity for hearing is mandatory under Section 75(4) of the Goods and Services Tax ( GST) Act.
The assessee, Eveready Industries India Ltd., filed the writ petition challenging an order passed under Section 74 of the Uttar Pradesh Goods & Service Tax Act, 2017, issued in FORM GST DRC-1 along with the Rectification Order issued in FORM GST DRC-08, by the revenue authorities of Uttar Pradesh determining their tax liability without a hearing.
The impugned show cause notice does not provide any date, place, or time of hearing, despite the same being a mandatory procedure. In the columns specified for date, place, and time of the hearing, the show cause notice mentions NA ( not applicable ), thereby denying the petitioner any opportunity for a hearing.
Atma Ram Verma, counsel for the petitioner, argued that despite the mandate of Section 75(4) of the Act providing personal hearing and despite the petitioner specifically asking for personal hearing, no opportunity of personal hearing was granted, and the impugned order was passed in violation of the settled principles of natural justice.
It was further submitted that the judgement of the Division Bench in Bharat Mint & Allied Chemicals, wherein the division bench has framed two questions to decide; the first related to whether the opportunity of personal hearing is mandatory under Section 75(4) of the GST Act 2017; and the second question was whether, under the facts and circumstances of the case, the impugned adjudication order has been passed in breach of the principle of natural justice and consequently, it deserved to be quashed in exercise of powers conferred under Article 226 of the Constitution of India.
The respondents argued that, against the impugned order of assessment, the petitioner has a statutory remedy under Section 107 of the Act, and all the arguments on the merits of the case can be dealt with by the appellate authority.
It was also pointed out that Section 74 of the Act relates to the determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised because of fraud or any willful misstatement or suppression of facts.
The High Court, comprised of a division bench of Justice Brij Raj Singh and Justice Sangeeta Chandra, disagreed with the argument of the respondent. The bench observed that “it is evident from the scheme of Section 74 that initially a notice along with a statement of tax payable along with penalty has to be issued by the proper officer within the time limit as prescribed, to which a representation can be made by the assessee in case he is dissatisfied with such computation of tax and penalty. On the other hand, if the assessee pays the amount as given in the notice along with interest payable thereon and penalty, then the proper officer may issue orders that may conclude the proceedings”.
The court found that Sub-Section (4) of Section 75 provides that 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. Sub-Section (5) provides that if sufficient cause is shown by the person chargeable with tax, the proper officer shall grant time to the said person and adjourn the hearing for reasons to be recorded in writing, provided that no such adjournment shall be granted more than three times to a person during the proceedings.
Consequently, the court allowed the writ petition and set aside the impugned orders, directing that the matter be remitted back to the proper officer to provide an opportunity for a personal hearing for the petitioner.
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