Order passed u/s 74 of UP GST Act Lacks Opportunity of Hearing: Allahabad HC directs De Novo Assessment [Read Order]

The Allahabad High Court has quashed an order dated February 22, 2023, and a subsequent appeal order dated January 16, 2023, both issued under Section 74 of the Uttar Pradesh Goods and Services Tax ( UPGST ) Act, 2017.

The petitioner, represented by Shubham  Agarwal, submitted that the order was passed without granting any opportunity of hearing to the petitioner, and accordingly, there has been a violation of the principles of natural justice. He further submitted that this ground was taken up in appeal, but the same was rejected by the Appellate Authority.

The petitioner relied upon a judgment of the court penned by Justice Pankaj Bhatia in M/s Daimond Steel vs. State of U.P. and 3 others, wherein, upon a detailed examination of Section 74 of the Act, it has been held that a best judgment assessment cannot be resorted to by the authorities when adjudication is made under Section 74 of the UP GST Act.

In contrast, the counsel for the revenue, Ravi Shankar Pandey, defended the orders issued by the authorities and requested time to file a counter affidavit. However, the court deemed this unnecessary as the issue was purely a matter of law.

Justice Shekhar B. Saraf, upon examining the material on record, agreed with the petitioner's argument. The bench referenced the case of M/s Shree Sai Palace v. State of U.P., wherein it was held that any adverse order under Section 74 of the Act necessitates a mandatory hearing under Section 75(4). This case also reinforced that the use of "or" in Section 75(4) implies a fundamental requirement to provide an opportunity for a personal hearing, ensuring procedural fairness and natural justice.

Moreover, the court found merit in the argument that the assessment carried out by the authorities was a best judgement assessment, which is impermissible under Section 74. Citing M/s Daimond Steel, the court noted that the adjudicating authority erred by relying on Income Tax guidelines, which are not applicable in determining tax liability under Section 74.

In light of these findings, the court quashed the impugned orders dated February 22, 2023, and January 16, 2023. It directed the authorities to conduct a de novo assessment after granting the petitioner an opportunity for a hearing, to be completed within three months from the date of the order.

The writ petition was allowed, with no order as to costs.

To Read the full text of the Order CLICK HERE

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