MSQ Steel Private Limited Vs Deputy Commissioner and Another (Allahabad High Court)
Summary: The Allahabad High Court, comprising Justice Shekhar B. Saraf and Justice Vipin Chandra Dixit, allowed the writ petition filed by MSQ Steel Private Limited challenging an adjudication order dated 26 August 2023 passed by the Deputy Commissioner under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017. The petitioner invoked Article 226 of the Constitution of India, contending that the adjudication proceedings suffered from procedural deficiencies affecting its right to a fair hearing. The Court examined the circumstances of the case and found that the controversy was squarely covered by its earlier coordinate Bench judgment in Mahaveer Trading Company Vs Deputy Commissioner State Tax and Another, Writ Tax No. 303 of 2024, Neutral Citation No. 2024:AHC:38820-DB. That decision addressed the mandatory requirement of providing an opportunity of personal hearing before passing an adverse GST adjudication order.
While considering the earlier judgment, the High Court reproduced observations concerning deficiencies in the scheduling and communication of personal hearings during GST proceedings. These included notices mentioning “N.A.” instead of specifying the date or time of personal hearing, fixing hearings before the deadline for filing replies to show-cause notices, and scheduling hearings on the same date as the reply deadline. The quoted judgment also referred to Office Memo No. 1406 dated 12 November 2024, issued by the Commissioner, Commercial Tax, Uttar Pradesh, identifying such procedural irregularities and requiring corrective action. The Court reiterated the principle that an opportunity of personal hearing must ordinarily precede an adverse adjudication order. An authority may proceed ex parte where a taxpayer waives that opportunity or fails to attend despite being granted a hearing, but it cannot dispense with the opportunity altogether. The Court also noted that the existence of a statutory appellate remedy does not prevent the High Court from exercising writ jurisdiction where fundamental principles of natural justice have been violated.
Applying the reasoning in Mahaveer Trading Company, the High Court held that the factual circumstances of MSQ Steel Private Limited were materially similar and that there was no justification for adopting a different approach. Accordingly, the Court quashed and set aside the adjudication order dated 26 August 2023. It directed the concerned officer to provide the petitioner another opportunity to submit a fresh reply, thereafter fix a date for personal hearing, and pass a reasoned order in accordance with law. The entire exercise was directed to be completed within two months. The writ petition was disposed of without determining the underlying GST liability on merits. The judgment reinforces the requirement of procedural fairness in GST adjudication and the necessity of providing a meaningful opportunity of hearing before an adverse decision is taken.
Cases Discussed
Mahaveer Trading Company Vs Deputy Commissioner State Tax and Another (Allahabad High Court); WRIT TAX No. 303 of 2024; Neutral Citation No. 2024:AHC:38820-DB. The Court followed this coordinate Bench decision holding that a personal hearing must be offered before passing an adverse GST adjudication order. The precedent also recognised that a fundamental violation of natural justice can justify interference in writ jurisdiction notwithstanding the availability of an alternative appellate remedy.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. This is a writ petition under Article 226 of the Constitution of India wherein the writ petitioner is aggrieved by the order dated August 26, 2023 passed by the respondent No.1 under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017.
2. We have heard counsel appearing on behalf of the parties.
3. The factual matrix is such that the matter is squarely covered by a coordinate Bench judgment of this Court in Mahaveer Trading Company vs. Deputy Commissioner State Tax and another [(Writ Tax No.303 of 2024), Neutral Citation No.- 2024:AHC:38820-DB]. Relevant portion of the aforesaid judgment is delineated below:
“10. On query made, the learned Additional Chief Standing Counsel fairly submits, in light of similar occurrences, noticed in other litigation, he had apprised the Commissioner, Commercial Tax. In turn, the Commissioner, Commercial Tax, Uttar Pradesh, has issued Office Memo No. 1406 dated 12.11.2024. The same has been addressed to all Additional Commissioner to be communicated to all field formations for necessary compliance. A copy of the same has been made available to this Court. It reads as below:
“1. The column in which date of personal hearing has to be mentioned, only N.A. is mentioned without mentioning any date.
2. The column in which time of personal hearing has to be mentioned, only N.A. is mentioned without mentioning time of hearing.
3. In some cases, the date of personal hearing is prior to which reply to the Show Cause Notice has to be submitted this is non-est and this practice has to be discontinued. The date of reply to the Show Cause Notice has to be definitely prior to the date of personal hearing.
4. In some cases, the date of personal hearing is on the same date to which reply to the Show Cause Notice has to be submitted-this is non-est and this practice has to be discontinued. The date of reply to the Show Cause Notice has to be definitely prior to the date of personal hearing.
5. In all cases observed, the date of passing order either u/s 73(9)/74(9) etc. of the Act is not commensurate to the date of personal hearing. It is trite law that the date of the order has to be passed on the date of personal hearing. For eg.,the date of furnishing reply to SCN is 15.11.2023 and date of personal hearing is 17.11.2023, then the date of order has to be 17.11.2023″
11. In view of the facts noted above, before any adverse order passed in an adjudication proceeding, personal hearing must be offered to the noticee. If the noticee chooses to waive that right, occasion may arise with the adjudicating authority, (in those facts), to proceed to deal with the case on merits, ex-parte. Also, another situation may exist where even after grant of such opportunity of personal hearing, the noticee fails to avail the same. Leaving such situations apart, we cannot allow a practice to arise or exist where opportunity of personal hearing may be denied to a person facing adjudication proceedings.
12. Thus, the impugned order cannot be sustained in the eyes of law. It has been passed in gross violation of fundamental principles of natural justice. The self imposed bar of alternative remedy cannot be applied in such facts. If applied, it would be of no real use. In fact, it would be counter productive to the interest of justice. Here, it may be noted, the appeal authority does not have the authority to remand the proceedings.”
4. Upon a perusal of record, it appears that the factual matrix is very similar to one in Mahaveer Trading Company’s (supra). We do not see any reason to take a different stand.
5. Accordingly, the impugned order dated August 26, 2023 is quashed and set-aside with a direction given to the officer concerned to grant the petitioner another opportunity of filing a fresh reply and thereafter fix a date of hearing and pass a reasoned order. The entire exercise should be completed within a period of two months from date.
6. The writ petition is disposed of.
