Ex-Parte GST Adjudication Invalidated for Failure to Grant Hearing: Allahabad HC

Background of the Dispute

The present matter arose from a writ petition filed before the Allahabad High Court challenging an adjudication order dated 18.08.2023 issued by the Deputy Commissioner under Section 74 of the UPGST Act, 2017. The assessee contended that the order was passed without affording an adequate opportunity of personal hearing, thereby violating fundamental principles of natural justice embedded in the procedural framework of the Goods and Services Tax legislation.

Preliminary Objection on Alternative Remedy

At the commencement of the proceedings, the Revenue's counsel raised a threshold objection regarding the maintainability of the writ petition. The objection was founded on the premise that an alternative statutory remedy of appeal existed under Section 107 of the Act, and therefore, the extraordinary writ jurisdiction ought not to be invoked by the assessee.

The petitioner's counsel effectively countered this preliminary objection by drawing the Court's attention to the alleged breach of Section 75(4) of the UPGST Act, 2017. This statutory provision mandates that when an adverse decision is contemplated against an assessee, or when a written request is made, an opportunity of personal hearing must be granted before passing the final adjudication order.

The Allahabad High Court referred to its earlier pronouncement in Writ Tax No. 303 of 2024, titled Mahaveer Trading Company versus Deputy Commissioner State Tax and Another, wherein identical procedural irregularities were examined and adjudicated upon. In that matter, the Court had comprehensively analyzed the mandatory nature of affording personal hearing opportunities in assessment and adjudication proceedings under tax legislation.

Statutory Mandate Under Section 75(4)

The statutory provision of Section 75(4) of the UPGST Act, 2017 explicitly stipulates:

"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."

This provision clearly establishes the mandatory requirement that before any adjudication order imposing tax liability or penalty is finalized, the concerned person must be given a reasonable opportunity to present their case through personal hearing.

Factual Matrix of the Case

Timeline of Proceedings

Upon examination of the chronology of events in the present matter, the following sequence emerged:

  1. A notice for filing reply was issued on 28.06.2023
  2. The deadline for submission of reply was fixed as 28.07.2023
  3. No separate or subsequent date was designated for personal hearing
  4. Without passing any interim order on the date originally fixed (28.07.2023), the adjudicating authority proceeded to pass the final impugned order on 18.08.2023
  5. No further notice was issued fixing a specific date and time for personal hearing
  6. The assessee was not granted any opportunity to present oral submissions or participate in a hearing

This sequence of events demonstrated a complete absence of compliance with the procedural safeguards mandated under the statute.

Analysis of the Earlier Precedent

Observations in Mahaveer Trading Company Case

In the precedent case of Writ Tax No. 303 of 2024 (Mahaveer Trading Company versus Deputy Commissioner State Tax and Another), the Court had made several significant observations:

Fundamental Procedural Requirement: The Court emphasized that providing an opportunity of personal hearing before passing any assessment or adjudication order constitutes a basic procedural requirement under all taxing statutes, irrespective of any changes in substantive law.

Examination of Record: In that matter, the record revealed that although the assessee had appeared on three separate dates and filed written replies in response to show-cause notices, no opportunity of oral or personal hearing was granted before the final order was passed.

Unacceptable Practice: The Court categorically held that merely changing the substantive law framework does not authorize revenue authorities to alter their approach toward mandatory procedural requirements. The denial of personal hearing was characterized as wholly unacceptable and contrary to settled principles of procedural law.