Introduction: The Allahabad High Court recently delivered a judgment in the case of Viswkarma Furniture vs. Additional Commissioner Grade 2 & Anr., challenging an order dated 14.03.2022, and another dated 14.11.2022, under section 74 of the U.P.G.S.T. Act. The petitioner contended that the demand was assessed without affording them an opportunity for a personal hearing, contravening the mandate of Section 75(4) of the U.P. G.S.T. Act.
Background: The dispute arose when the petitioner received a show cause notice on 07.10.2021, based on a Special Investigation Branch (SIB) survey report conducted on 13.03.2019. The notice, issued under section 74 of the U.P.G.S.T. Act, prompted the petitioner to respond by 07.11.2021. However, crucially, the notice did not specify the date, time, or venue for a personal hearing.
The petitioner, in their reply, denied the allegations and requested a fair opportunity for a personal hearing, stressing the importance of not drawing adverse inferences without such an opportunity. Despite this, a reminder was sent on 27.12.2021, urging the petitioner to respond by 15.01.2022, once again failing to provide details for a personal hearing.
The order in question was passed on 14.03.2022, seemingly without affording the petitioner the requested personal hearing. Subsequently, the petitioner’s appeal, though delayed, was dismissed on 14.11.2022.
Legal Argument and Precedents: The petitioner, represented by counsel, argued that the order dated 14.03.2022 was not addressed during the appeal process and, therefore, could be challenged on the limited grounds available for judicial review. The primary contention was that the order was in violation of Section 75(4) of the U.P. G.S.T. Act, as it was issued without a proper opportunity for a personal hearing.
To support this argument, the petitioner relied on the judgment in Writ Tax No.1029 of 2021 (Bharat Mint and Allied Chemicals vs. Commissioner of Commercial Tax), decided on 04.03.2022, as well as the order in Writ Tax No.58 of 2023 (M/s Mohan Agencies vs. State of U.P.), decided on 13.02.2023.
Court’s Ruling: After hearing arguments from both parties, the court directed the Standing Counsel to verify whether the petitioner had indeed demanded a personal hearing. The Standing Counsel’s instructions revealed that no such demand had been made.
In light of this information, the court concluded that the order dated 14.03.2022 was in clear violation of Section 75(4) of the U.P. G.S.T. Act and principles of natural justice. Drawing on precedents set by the cases of Bharat Mint and Allied Chemicals and M/s Mohan Agencies, the court allowed the writ petition, quashed the order dated 14.03.2022, and remanded the matter to the respondent no.2 to issue a fresh notice to the petitioner in accordance with the law. The court emphasized the importance of adhering to due process and providing a fair opportunity for a personal hearing before making assessments under the U.P.G.S.T. Act.
Conclusion: The judgment in the case of Viswkarma Furniture underscores the significance of following due process in tax assessments and serves as a reminder that orders passed without affording parties an opportunity for a personal hearing may be subject to judicial scrutiny. The ruling reaffirms the principles of natural justice and sets a precedent for similar cases in the realm of goods and services tax.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Sri B. K. Pandey and Aditya Pandey for the petitioner and the learned Standing Counsel.
The present petition has been filed challenging the order dated 14.03.2022 as well as the order dated 14.11.2022 by which the demand under section 74 of U.P.G.S.T. Act was quantified and assessed against the petitioner as well as the appeal stood dismissed as being beyond limitation.
The contention of the counsel for the petitioner is that the petitioner was served with a show cause notice dated 07.10.2021 under section 74 of the Act on the basis of the SIB survey report, which was carried out on 13.03.2019 wherein certain goods were found, which according to the SIB report, were unaccounted for.
The contention of the counsel for the petitioner is that the show cause notice under section 74 of the Act was served on the basis of the SIB report and the petitioner was called upon to show cause as to why the demand may not be quantified and assessed against the petitioner. He also states that the show cause notice in the prescribed Form and GST-DRC-01 was also issued which is on record at page no.34 of the writ petition. He argues that the date for filing the reply was fixed on 07.11.2021, however, no date for personal hearing, time for personal hearing or venue of the personal hearing was indicated in the said show cause notice.
It is claimed that the petitioner filed a reply to the said show cause notice wherein the petitioner denied the allegations levelled in the show cause notice and also requested that no adverse influence be drawn without giving an opportunity of personal hearing. It is argued that despite the said request, once again a reminder dated 27.12.2021 contained in Annexure no.3, was sent to the petitioner wherein the petitioner was called upon to submit the reply by 15.01.2022. In the columns ‘date of personal hearing’, ‘time of personal hearing’ and ‘venue where the personal hearing will be held’, ‘NA’ was mentioned.
It is argued that the order came to be passed against the petitioner on 14.03.2022. He draws my attention to the said order, which is contained in Annexure no.4 to argue that no opportunity of hearing was granted and the assessment has been done only on the basis of the SIB report. The petitioner preferred an appeal, however, there was a delay in filing the appeal, as such, the appeal stood dismissed vide order dated 14.11.2022.
The contention of the counsel for the petitioner is that the order dated 14.03.2022 is not merged in the order dated 14.11.2022 as the appeal was never heard on merits and seeks to challenge the order dated 14.03.2022 on the limited grounds available for judicial review of a quasi judicial order in exercise of the power under Article 226 of the Constitution of India. The limited ground for argument of the counsel for the petitioner that the order passed without giving an opportunity of hearing is contrary to the mandate of section 75(4) of the U.P. G.S.T. Act.
He places reliance on the judgment of this Court in Writ Tax No.1029 of 2021 (Bharat Mint and Allied Chemicals vs. Commissioner of Commercial Tax) decided on 04.03.2022 as well as the order in Writ Tax No.58 of 2023 (M/s Mohan Agencies vs. State of U.P.) decided on 13.02.2023.
In the light of the averments made in the writ petition, the Standing Counsel was directed to obtain the instructions to the effect as to whether any personal hearing was granted to the petitioner or not, the Standing Counsel has produced the instructions which are taken on record, which clearly mentioned that the petitioner never demanded an opportunity of hearing.
In view of the said stand taken by the Standing Counsel, as reflected in the instructions, I have no hesitation in holding that the order dated 14.03.2022 is clearly in violation of the Section 75(4) of the U.P. G.S.T. Act and is also in violation of the principles of natural justice.
Thus, following the law as laid down in the cases of Bharat Mint and Allied Chemicals and M/s Mohan Agencies (supra), the writ petition is allowed. The order dated 14.03.2022 is quashed. The matter is remanded to the respondent no.2 to issue a fresh notice to the petitioner in accordance with law and thereafter to take steps strictly in accordance with law, if so advised.