Mandatory Personal Hearing Before Adverse GST Assessment: Analysis of Kemexel Ecommerce Pvt. Ltd. Vs State of Punjab And Others

Introduction

The Punjab and Haryana High Court, in Kemexel Ecommerce Pvt. Ltd. Vs State of Punjab And Others, has reiterated the mandatory nature of the opportunity of personal hearing under Section 75(4) of the Central Goods and Services Tax Act, 2017 (CGST Act). The Court set aside an adjudication/assessment order dated 23.08.2024 on the sole ground that no opportunity of personal hearing was afforded to the assessee before passing an adverse order, despite the clear statutory mandate.

This decision underscores that even where the assessee does not file a written reply to a show cause notice, the GST authorities cannot bypass the requirement of granting a personal hearing where an adverse outcome is contemplated.

Factual Background

Registration and Jurisdiction

  • The petitioner, Kemexel Ecommerce Pvt. Ltd., is a company with its registered office at Gurugram.
  • The company is also registered with the GST authorities in the State of Punjab, and its GSTIN and address were duly reflected in the proceedings.

Issuance of Show Cause Notice under Section 73

  • For the financial year 2019-20, the Punjab GST authorities initiated proceedings against the petitioner under Section 73 of the CGST Act.
  • A show cause notice dated 24.05.2024 was issued requiring the assessee to explain alleged discrepancies and proposed tax liability for the tax period APR 2019 – MAR 2020.

Contents of the Show Cause Notice

The show cause notice, inter alia, stated:

  • It related to scrutiny for FY 2019-2020 under Section 73.

  • It set out tax and other dues as under for the period APR 2019 – MAR 2020:

    • SGST:
      • Tax: Rs.8,35,032/-
      • Interest: Rs.6,98,407/-
      • Penalty: Rs.83,503/-
      • Total: Rs.16,16,942/-
    • CGST:
      • Tax: Rs.8,35,032/-
      • Interest: Rs.6,98,407/-
      • Penalty: Rs.83,503/-
      • Total: Rs.16,16,942/-
    • IGST (Place of supply: Punjab):
      • Tax: Rs.2,46,708/-
      • Interest: Rs.2,06,343/-
      • Penalty: Rs.24,671/-
      • Total: Rs.4,77,722/-

  • Overall, the total tax, interest and penalty proposed through the show cause notice amounted to Rs.37,11,606/-.

  • The notice fixed a due date for filing written reply, i.e., 24.06.2024.

  • Importantly, in the tabular portion dealing with personal hearing, the columns for:

    • Date of personal hearing,
    • Time of personal hearing, and
    • Venue of personal hearing

    all reflected “NA” (or “not applicable”), indicating that no date, time or place for a personal hearing had been provided.

Reminder Notice and Continued Absence of Hearing Details

  • As the assessee did not submit a written reply to the show cause notice, the department issued a reminder dated 01.08.2024.
  • The reminder referred to the earlier show cause notice dated 24.05.2024 and recorded that no reply had been received and that the assessee had not appeared to explain the charges.
  • The reminder again:
    • Requested submission of reply by 06.08.2024, and
    • Stated that the assessee “may appear” for personal hearing either in person or through an authorised representative “on the date, time and venue, if mentioned” in the table below.
  • However, in the table associated with personal hearing details, once again:
    • Date of personal hearing: “NA”
    • Time of personal hearing: “NA”
    • Venue of personal hearing: “NA”

Thus, although the reminder textually referred to a possibility of personal hearing, no concrete date, time or venue was notified.