GST department obligated to provide a hearing if adverse decision was contemplated

Primeone Work Force Pvt. Ltd. Vs Union of India (Allahabad High Court)

1. Introduction: The Allahabad High Court, in response to four writ petitions (pertaining to Financial Years 2019-20, 2020-21, 2021-22, and 2022-23), heard arguments from counsels representing Primeone Work Force Pvt. Ltd., Union of India, and other respondents. The petitions challenged orders and show cause notices issued by respondent no.4, dated 09.10.2023, 12.10.2023, 11.10.2023, and 12.10.2023, as well as show cause notices dated 14.9.2023, 14.9.2023, 9.2023, and 13.9.2023, respectively.

2. Show Cause Notices: The show cause notices required the petitioners to justify why tax and penalties should not be imposed on them. The specified date for response was 22.9.2023, 22.9.2023, 13.10.2023, and 13.10.2023 in the respective writ petitions. The petitioners submitted their replies on 21.9.2023, 21.9.2023, 10.2023, and 07.10.2023. However, an inadvertent error in marking “NO” for the opportunity of hearing raised concerns.

3. Legal Basis – Section 75(4) of U.P. GST Act, 2017: The counsel for the petitioners argued that Section 75(4) of the U.P. GST Act, 2017, mandates an opportunity of hearing when an adverse decision is contemplated. Highlighting the significance of this provision, the counsel pointed out that the orders were issued a day before the scheduled hearing date, depriving the petitioners of their right to present their case. Reference was made to a relevant judgment in Writ Tax No.551 of 2023 “M/s. Mohini Traders vs. State of U.P. and another,” reinforcing the need for a fair hearing.

4. Court’s Observations and Decision: The Court observed that Section 75(4) explicitly requires an opportunity of hearing when an adverse decision is anticipated. Considering that both tax and penalties were imposed, and an adverse decision was contemplated, the Court held that the department was obligated to provide a hearing. The Court referred to its previous decision in M/s. Mohini Traders (supra), supporting the petitioner’s stance.

5. Judgment and Orders: In light of the denial of an opportunity of hearing, the Court allowed all four writ petitions and annulled the impugned orders. The department was granted the liberty to afford a fresh opportunity for hearing based on the replies submitted by the petitioners. The Court emphasized the petitioners’ cooperation for the expeditious resolution of the case and left other raised questions open for future consideration.

6. Conclusion: The Allahabad High Court’s judgment emphasizes the fundamental right to an opportunity of hearing, especially when an adverse decision is anticipated, as mandated by Section 75(4) of the U.P. GST Act, 2017. The decision reflects the Court’s commitment to procedural fairness and adherence to legal provisions.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Sri Avinash Poddar assisted by Sri Neeraj Singh, learned counsel for petitioners, Sri Ashwani Kumar Singh, learned counsel for respondent no.1, learned Standing Counsel for the State and Sri Dipak Seth, learned counsel for respondent nos.2 and 5 in all the petitions.

2. These are four writ petitions with regard to Financial Year 2020-21, 2022-23, 2021-22 and 2019-20 respectively. Petitioners have approached this Court challenging the orders dated 09.10.2023, 12.10.2023, 11.10.2023 and 12.10.2023 as well as show cause notices dated 14.9.2023, 14.9.2023, 9.2023 and 13.9.2023 issued by respondent no.4 in all four writ petitions respectively.

3. The said show cause notices were given asking the petitioners to show cause as to why tax and penalty be not imposed upon them. The date fixed in the show cause notice issued to the petitioners was 22.9.2023, 22.9.2023, 13.10.2023 and 13.10.2023 respectively in all four writ petitions. The petitioners had submitted their reply on 21.9.2023, 21.9.2023, 10.2023 and 07.10.2023 respectively. However, it appears that by mistake they marked as “NO” for opportunity of hearing. Learned counsel for petitioners submits that the same got marked due to some technical glitch/mistake on the portal.

4. Be that as it may, learned counsel for petitioners further submits that Section 75(4) of the U.P. GST Act, 2017 mandatorily requires an opportunity of hearing to be given to the petitioners. He further submits that the orders are passed a day prior to the date fixed for hearing. Thus, learned counsel for petitioners states that petitioners have not been given any opportunity of hearing and in fact, the authority did not even wait till the date, for which notice was given to the petitioners. Learned counsel for petitioners further relies upon a judgment dated 3.5.2023 passed by a Division Bench of this Court in Writ Tax No.551 of 2023 “M/s. Mohini Traders vs. State of U.P. and another”, which again relies upon a judgment of this Court in Bharat Mint & Allied Chemicals Vs. Commissioner, Commercial Tax & others (2022) 48 VLJ 325.

5. Section 75(4) of the U.P. GST Act, 2017 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.”

6. Section 75(4) of the Act of 2017 specifically states ‘or where any adverse decision is contemplated against such person’.

7. Since in the present cases, both tax and penalty are imposed against the petitioners and admittedly, an adverse decision is contemplated against the petitioners, therefore, under Section 75(4) of the Act of 2017, an opportunity of hearing was mandatorily required to be given by the department to the petitioners and merely marking the same as “NO” in the option cannot entitle the department to pass an order without giving any opportunity or even without waiting for the petitioners to appear on the date fixed. This Court has already taken a similar view in M/s. Mohini Traders (supra).

8. In view thereof, all the writ petitions are allowed on the sole ground of opportunity of hearing and the orders impugned in all four writ petitions are quashed.

9. It shall be open for the department to give a fresh opportunity of hearing to the petitioners on the reply already submitted by the petitioners to the show cause notice and pass a fresh order in accordance with law. The petitioners shall fully cooperate in expeditious disposal of the case.

10. All other questions raised in the writ petitions are left open to be decided at the appropriate stage.