GST SCN Without Date and Time of Personal Hearing is Invalid: Gauhati HC sets Aside Adverse Order and Directs Personal Hearing [Read Order]

The Gauhati High Court has held that failure to clearly indicate the date and time for personal hearing within a Goods and Services Tax (GST) Show Cause Notice (SCN) renders any adverse order passed pursuant to it unsustainable under Section 75(4) of the GST Act, 2017.

The Petitioner, Shreearihant Logistics Private Limited was issued a Summary of Show Cause Notice dated 28.09.2023 in Form GST DRC-01 pertaining to the period from July 2017 to March 2018.

The summary was uploaded to the portal along with a tax determination statement but contained no information regarding the date, time or venue for a personal hearing. The petitioner did not submit any reply towards the summary.

Subsequently, the AO proceeded to pass an adverse order against the petitioner on 28.12.2023 through Form GST DRC-07, on grounds that the assessee failed to respond within the prescribed time of 30 days.

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The petitioner, represented by Amit Goyal submitted that even when a hearing is not expressly sought for by the assessee, it is trite law that an opportunity of hearing is meted out to the assessee prior to passing an adverse decision. Reference was made to the DRC-01 summary to point out that the relevant field regarding specific details of the hearing opportunity had been left blank.

Standing Counsel B. Choudhury appearing for the Finance and Taxation Department submitted that the respondent had issued the Summary of the SCN in Form DRC-01, accompanied by the determination of tax which as per the respondents would have provided all the details so that the petitioners could have submitted the reply.

However, the standing counsel submitted that no separate SCN existed other than the attached determination of tax and acknowledged that the attachments bore no signature of the Proper Officer, with it only stating “Sd- Proper Officer”.

The Bench of Justice Sanjay Kumar Medhi observed that under Section 75(4) of both the Central and State GST Acts, an opportunity of hearing is mandatory either when a written request is made by the assessee or when an adverse decision is proposed.

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The Court further noted that the DRC-01 form included a column for hearing details, but in the present instance, the fields were marked “NA” indicating no opportunity was provided to the petitioner. The Bench clarified that even if no reply is filed, the second limb of Section 75(4) still applies, mandating a hearing before the issuance of any adverse order.

Relying on the principles of natural justice as well as the interpretation of Section 75(4) by the Chhattisgarh High Court in Mahindra & Mahindra Ltd. v. Union of India (2024), the Court held that denial of personal hearing rendered the impugned order legally unsustainable. The High Court emphasized that such procedural safeguards are not optional and cannot be bypassed by presumption.

Accordingly, the Gauhati High Court set aside the impugned order dated 28.12.2023. However, the Court granted liberty to the department to initiate de novo proceedings under Section 73, if it chooses to do so.

To facilitate this, the Court directed that the period between the issuance of the Summary of the SCN and the date when a certified copy of the instant judgment is served upon the Proper Officer be excluded from the limitation under Section 73(10) of the Act.

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