GST Adjudication Order Invalid as SCN Mentioned ‘NA’ for Personal Hearing: P&H HC

Parv Alloys & Metals Vs Union of India (Punjab and Haryana High Court)

The Punjab and Haryana High Court set aside an adjudication order passed under Section 74 of the Central Goods and Services Tax Act, 2017, holding that the failure to grant a personal hearing before passing an adverse order violated Section 75(4) of the Act and the principles of natural justice.

The case arose from a show cause notice dated 03.02.2023 issued for the financial year 2017-18 alleging short payment of tax and wrongful availment or utilization of input tax credit. The notice directed the petitioner to submit a written reply by 02.03.2023 but mentioned “NA” against the date, time, and venue for personal hearing. The demand raised in the notice totaled ₹1,49,26,704 under CGST and SGST.

The petitioner did not submit a written reply to the notice. Thereafter, the authorities passed an adjudication order dated 19.05.2023 directing payment of the demanded tax. The petitioner challenged the order on the ground that no opportunity of personal hearing had been granted before passing the adverse decision.

The High Court examined Section 75(4) of the CGST Act, which states that an opportunity of hearing must be granted where an adverse decision is contemplated against a person. The Court observed that the statutory provision imposed an obligation on the revenue authorities to provide such an opportunity before passing an adverse order.

Rejecting the State’s argument that no hearing was necessary because the petitioner had not filed a written response, the Court held that even in the absence of a reply, the assessee was entitled to a hearing under Section 75(4). The Court noted that during such hearing, the assessee could have produced records, account books, ledgers, or written submissions in support of its defence.

Accordingly, the High Court allowed the petition and set aside the adjudication order dated 19.05.2023. However, liberty was granted to the revenue authorities to proceed afresh in accordance with law and after complying with Section 75(4) of the CGST Act.

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FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT

1. Through the instant petition, challenge is made to the adjudication order dated 19.05.2023 (Annexure P-3) on the ground that prior to issuance of such order no opportunity of personal hearing was offered to the petitioner which not only violates the principles of natural justice but also contravenes Section 75(4) of the Central Goods and Services Tax Act, 2017 (for short, ‘the 2017 Act’).

2. Briefly noticed, the facts are that a show cause notice dated 03.02.2023, pertaining to the financial year 2017-18, was issued to the petitioner by the respondent-authorities under Section 74 of the 2017 Act, granting an opportunity to the petitioner to respond in writing to the allegations made therein. However, no date, time or venue for the grant of personal hearing was mentioned therein. In response to the said show cause notice, the petitioner did not file any written response. Thereafter, the respondent-authorities passed the adjudication order dated 19.05.2023 requiring the petitioner to deposit the tax demanded through it. It is in these circumstances that the petitioner has knocked the doors of this Court for the aforesaid relief.

3. Learned counsel for the parties have been heard and with their able assistance, the records of the case have also been perused.

4. Show cause notice dated 03.02.2023 issued to the petitioner by the respondent – GST authorities, pertaining to the financial year 2017-18 is reproduced below for ready reference:-

“Reference No.ZD030223002234C
To
GSTIN/ID: 03AATFP6304K1Z0
Name: Parv Alloys & Metals
Address: Amloh Road, Near Bhambari Mill, Mandi Gobindgarh,
Fatehgarh Sahib, Punjab, 147301

Tax Period: JUL 2017 – MAR 2018

ARN-NA
(Voluntary payment intimation details, if applicable)

Act/Rules Provisions:
PGST/CGST ACT, 2017 Section 74 read with Rule with 100(2) and 142(1)

Show Cause Notice under Section 74

It has come to my notice that tax due has not been paid or short paid or refund has been released erroneously or input tax credit has been wrongly availed or utilized by you or the amount paid by you through the above referred application for intimation of voluntary payment for the reasons and other details mentioned in annexure for the aforesaid tax period.

Therefore, you are directed to furnish a reply alongwith supporting documents as evidence in support of your claim by the date mentioned in table below.

You may appear before the under singed or personnel hearing either in person or through authorized representative for representing your case on the date, time and venue, if mentioned in table below.

Please note that besides tax, you are also liable to pay interest and penalty in accordance with the provisions of the Act.

Please also note that if you make payment of tax stated above along with up to date interest and penalty @ 25% of tax within 30 days of the communication of this notice, then proceeding may be deemed to have concluded.

Demands Details:-

Signature
Name: Aman Gupta
Designation: Assistant Commissioner Jurisdiction: Fatehgarh Sahib
Ludhiana Punjab.”

5. A perusal of the afore-referred show cause notice dated 03.02.2023 clearly reveals that against the column of date, time and venue for personal hearing “NA” or not applicable finds mentioned.

6. At this stage, Section 75(4) of the 2017 Act needs to be referred The same reads as under:-

“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.”

7. A perusal of the afore-quoted provision leaves no room for doubt that before any adverse decision is even contemplated against an assessee under the 2017 Act, the respondent-revenue is under a statutory obligation to provide to the assessee an opportunity of hearing which, admittedly, in the case in hand, has not been done.

8. The submission raised by the learned State counsel that since to the show cause notice, the petitioner did not file a written response, no opportunity of hearing was required to be granted to the petitioner is required to be considered only to be rejected because under Section 75(4) of the 2017 Act, an assessee is statutorily entitled to be granted an opportunity of hearing before any adverse decision is even contemplated against him. Further, in the absence of a written response, if the petitioner had been granted an opportunity of hearing, it could, at the time of such hearing, produce its original record in the form of account books, ledgers etc. and/or file written arguments in defence and make an attempt to satisfy the Assessing Officer to withdraw the show cause notice served upon him.

9. In the light of the above discussion, the present petition is accepted, resulting in the setting aside of the impugned adjudication order dated 19.05.2023 (Annexure P-3). However, liberty is granted to the respondent-revenue to proceed against the petitioner but only after following the provisions of law including Section 75(4) of the 2017 Act.

10. No costs.