GST Order issued imposing Penalty u/s 74 without Granting Hearing Opportunity: Madras HC sets aside order [Read Order]

The State Tax Officer (Intelligence), Hosur, issued a show cause notice on July 22, 2024, based on electricity consumption patterns, alleging that the production capacity recorded was not in line with the disclosed turnover.

The assessing officer concluded that the discrepancies suggested either unaccounted production in unregistered premises or purchases from undisclosed sources, thereby justifying the imposition of penalty under Section 74 of the TNGST/CGST Act, 2017.

Complete GST Act & Rules with amendments made by financial bill, 2025 - CLICK HERE

In response, the petitioner submitted a comprehensive reply on September 19, 2024, running into 130 pages and referencing several judicial precedents. However, the impugned penalty order was passed on September 26, 2024, without further inquiry or interaction with the petitioner, leading to the current writ petitions challenging the same.

The petitioner, represented by counsel Mr. P. Raj Kumar, argued that the impugned order was passed in gross violation of Section 75(4) of the GST Act, which mandates an opportunity of personal hearing whenever a request is made or an adverse decision is contemplated. It was contended that no such opportunity was provided prior to the order's issuance.

On the contrary, the State contended through its counsel that personal hearings were indeed scheduled and conducted on August 23, August 30, and September 11, 2024. However, the High Court found that the contents of the final order did not reflect any substantive consideration of the reply filed by the petitioner, nor did it demonstrate that a proper opportunity of hearing had been granted before imposing the penalty.

Step by Step Handbook for Filing GST Appeals - CLICK HERE

Justice Krishnan Ramasamy held that the principles of natural justice had been violated. The Court observed that a detailed reply was submitted by the petitioner, which merited thorough consideration and an oral hearing. The absence of such a procedure invalidated the respondent's order.

Accordingly, the Court set aside the penalty order dated September 26, 2024, and remanded the matter for fresh consideration. The petitioner has been directed to file a reply along with supporting documents within two weeks, following which the respondent is to issue a 14-day notice and provide a personal hearing before passing a fresh, reasoned order in accordance with the law.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates