GST Authorities Cannot Treat Personal Hearing as Mere Formality: Allahabad HC Sets Aside GST Order [Read Order]

The Allahabad High Court has held that personal hearing under Section 75 of the GST ( Goods and Services Tax) Act, 2017 is not a mere formality, and tax authorities must ensure both prior notice and a fair opportunity to be heard before finalizing assessments.

The observation came in the writ petition filed by M/s Vedika Guest House, a partnership firm engaged in the hospitality business, challenging an ex parte GST demand order. It contended that no show cause notice (SCN) or hearing opportunity was effectively served before passing the assessment order dated 15th April 2021 under Section 74 of the Act. It was argued that the alleged SCN (Form GST DRC-01) was neither physically served nor visible on the general notices tab on the GST portal.

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Instead, it was placed under a separate tab titled "view additional notices and orders," of which the petitioner had no knowledge. As a result, the firm remained unaware of the proceedings until February 2024, when it accessed the portal and discovered the demand order. By then, the limitation period for filing a statutory appeal had already lapsed.

Justice Ajit Kumar, hearing the case, took serious note of the procedural violations. The Court stated that denying a taxpayer the right to respond or participate in a personal hearing goes against the express mandate of Section 75(4) of the GST Act.

The Court also relied on several Division Bench decisions, including Ola Fleet Technologies Pvt. Ltd. v. State of U.P., Shyam Roshan Transport v. State of U.P., and M/s Sai Dham Residency v. State of U.P., where similar procedural lapses were held to vitiate the assessment proceedings.

The Court also noted the Supreme Court's ruling in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company, which reiterated the need to strictly construe tax statutes and respect to procedural protections because they have a direct bearing on the rights and obligations of individuals.

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The Court ruled that even if a taxpayer does not respond to a show cause notice, the right to a personal hearing remains, and authorities must give them a chance to provide oral and documentary evidence.

The bench refused to condone the authorities' procedural shortcut. It was noted that the entire assessment order could not be upheld because it was issued ex parte, lacking to comply with the required procedure obedience.

The high court directed that the impugned order dated 15.04.2021 be treated as a notice under Section 74 of the Act and granted the petitioner eight weeks to file a detailed reply with supporting documents. The assessing officer was directed to consider the reply, provide a proper hearing, and pass a fresh order on merits within four weeks thereafter.

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