“Even if no request is received from the person chargeable with tax or penalty, an opportunity of personal hearing must be granted if any adverse decision is contemplated against such person,” ruled Justice Shekhar B. Saraf of Allahabad High Court.
A Single bench observed that “Personal hearing provides a forum for nuanced discussion and exploration of these complexities, enabling decision-makers to make well-informed and equitable decisions based on a comprehensive understanding of the circumstances at hand.”
The petitioner, a proprietorship firm involved in scrap job work and trading of iron machinery parts, faced allegations of wrongly availing Input Tax Credit ( ITC ) amounting to INR. 22,00,00,000 against bogus tax invoices following an inspection in July 2019.
Despite responses from the petitioner, the Deputy Commissioner imposed tax, penalty, and interest totaling INR 6,78,12,667.92 for the A.Y. 2019-20. The petitioner’s appeal was upheld by the appellate authority.
The High Court, without delving into the case’s merits, highlighted a critical oversight—the failure to provide the petitioner with the mandatory “personal hearing” under Section 75(4) of the UPGST Act, 2017. This section mandates an opportunity for personal hearing either upon request by the individual or when an adverse decision is contemplated.
Section 75(4) of GST Act : “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.”
The court emphasised the significance of the term “or” in Section 75(4), indicating two distinct scenarios where a personal hearing must be granted: upon application by the individual or in anticipation of an adverse order. The personal hearing, essential for procedural fairness and natural justice, allows individuals to present their case, address allegations, and discuss concerns directly with decision-makers.
The court emphasised Section 75(4) of the UPGST Act, 2017, with the use of “or,” highlights the obligation to provide a personal hearing, whether initiated by individuals proactively or in response to anticipated adverse orders from tax authorities. This statutory mandate emphasised the necessity for a personal hearing before reaching a final decision on tax or penalty imposition, recognizing the intricate nature of such determinations involving legal and factual complexities.
The Allahabad HC quashed the impugned orders, directing authorities to grant the petitioner a personal hearing and subsequently issue a reasoned order within two months.
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