Case Law Details
Mauli Sai Developers Private Limited Vs Union of India (Bombay High Court)
In a landmark judgment, the Bombay High Court in the case of Mauli Sai Developers Private Limited Vs Union of India, underscored the imperative need for granting a personal hearing under Section 75(4) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), even if the assessee has not explicitly requested one in writing, particularly if an adverse order is contemplated. This ruling not only reinforces the principles of natural justice but also sets a significant precedent for the conduct of tax authorities.
Detailed Analysis: The writ petition filed by Mauli Sai Developers Private Limited challenged an order dated 8th September 2022, issued by the third respondent, for being in contravention of Section 75(4) of the CGST/MGST Act and violating the principles of natural justice. The controversy stemmed from a search operation conducted under Section 132 of the Act, leading to assessment proceedings for the years 2002-03 to 2008-19 and subsequent appeals.
Despite submitting replies to the show cause notice issued under Section 73 of the CGST/MGST Act, the petitioner contended that no personal hearing was afforded before passing the adverse order, necessitating tax payments amounting to Rs.20,02,16,288/- (inclusive of interest and penalty). The respondents argued that a personal hearing was not mandated as the petitioner had not requested one.
The High Court, upon reviewing the facts and the statutory framework under Section 75(4) of the CGST/MGST Act, unequivocally held that the tax authority is obliged to grant a personal hearing before passing an adverse order, irrespective of a formal request from the assessee. This interpretation aligns with the ethos of fair play and due process embedded within the principles of natural justice.
The court’s ruling was buttressed by references to similar decisions in previous cases, affirming the mandatory nature of personal hearings in such circumstances. Consequently, the impugned order was quashed, and the matter was remanded back to the respondent for a fresh decision, post granting a personal hearing to the petitioner.
Conclusion: The Bombay High Court’s decision in Mauli Sai Developers Private Limited Vs Union of India marks a critical juncture in the jurisprudence surrounding tax assessments under the CGST/MGST Act. By mandating personal hearings even in the absence of a specific request, the court has fortified the protective measures afforded to assessees, ensuring that the tax authorities’ actions are transparent, fair, and in accordance with the principles of natural justice. This ruling not only benefits the immediate parties involved but also serves as a guiding beacon for future cases, emphasizing the importance of adhering to procedural rights and due process.
The matter was argued by Ld. Counsel Bharat Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule made returnable forthwith. Heard finally by consent of the parties.
2. By this Writ Petition, filed under Article 226 of the Constitution of India, the Petitioner seeks quashing of an Order dated 8th September 2022 passed by Respondent No.3 on the ground that the same is contrary to the provisions of Section 75 (4) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and is in violation of the principles of natural justice.
3. The Petitioner is a Company engaged in the construction and sale of flats, complexes etc. to prospective buyers. The Petitioner is registered under the CGST Act and under the Maharashtra Goods and Services Tax Act, 2017 ( “the MGST Act”).
4. Respondent No.3, by a Notice dated 21st December 2020, specified that the Petitioner’s audit was to be conducted in terms of Section 65 of the CGST/MGST Act.
5. The Petitioner, by a letter dated 15th January 2021, requested Respondent No. 3 for an extension for conducting the audit as the Petitioner was in the process of preparation of documents.
6. By a letter dated 29th January 2021 addressed to Respondent No.3, the Petitioner submitted all the relevant documents to Respondent No.3 for the purposes of the audit. The officers of State Tax visited the place of business of the Petitioner along with their staff on 16th March 2021. At that time, the Chartered Accountant of the Petitioner was present and explained to them all the details of the business of the Petitioner. All the books, documents, records etc., as requested by the said officers, was provided to them.
7. By its letter dated 30th March 2021, the Petitioner filed its Reply to Form GST ADT-1. Thereafter, on 28th January 2022, Respondent No.3 issued audit findings to the Petitioner. On receipt of the said audit findings, the Petitioner filed its Reply dated 21 st February 2022.
8. Respondent No.3 conducted the audit based on the Reply given by the Petitioner and issued an Audit Report under Section 65(6) of the MGST Act in FORM ADT-02. The said audit inter-alia came to a finding that the Petitioner had not discharged tax liability on the flats/apartments transferred to the Slum Dwellers.
9. Thereafter, Respondent No.2 issued a pre-Show Cause Notice dated 26th April 2022. Further, Respondent No.3 also issued a Show Cause Notice under Section 73 of the CGST/MGST Act. The said Show Cause Notice alleged that the Petitioner had not paid or short paid CGST/MGST amounting to Rs.10,61,81,768/- on account of flats constructed and supplied to the Slum Rehabilitation Authority (“the SRA”) for the purpose of Slum Dwellers, that the Petitioner had claimed excess Input Tax Credit (“ITC”) and had not reversed the proportionate Input Tax Credit claimed on unsold flats/area at the time of the Occupation Certificate. Accordingly, the Petitioner was required to pay tax of Rs. 20,02,16,288/-(inclusive of interest and penalty) on the aforesaid grounds.
10. The Petitioner filed a Preliminary Reply dated 26th July 2022 to the said Show Cause Notice and uploaded the same. It is the case of the Petitioner that there was no option to seek personal hearing online. However, the acknowledgment of the reply uploaded showed that the Petitioner had not sought personal hearing. It is the case of the Petitioner that the said acknowledgment incorrectly shows that the Petitioner had not sought a personal hearing.
11. Thereafter, the Petitioner filed a detailed Reply dated 26th August 2022 to the said Show Cause Notice. The subject in the said Reply inadvertently referred to it as a response to the audit findings.
12. Respondent No.3 passed an Order dated 8th September 2022 without giving any personal hearing to the Petitioner. The said Order held that for the period 1st July 2017 to 31st March 2018, the Petitioner was required to pay tax on supply of flats by the Petitioner to the SRA, that the Petitioner had claimed excess ITC and had not reversed the proportionate ITC claimed on unsold flats/area at the time of the Occupation Certificate. Accordingly, by the said Order, the Petitioner was required to pay CGST/MGST amounting to Rs.20,02,16,288/- (inclusive of interest and penalty).
13. It is the case of the Petitioner that the said Order dated 8th September 2022 has been passed by Respondent No.3 in violation of the provisions of Section 75(4) of the CGST/MGST Act and in violation of the principles of natural justice as no personal hearing was given to the Petitioner before passing the said Order.
14. On the other hand, it is the contention of the Respondents that no personal hearing was required to be given to the Petitioner as the Petitioner had not made a request for such a personal hearing and therefore Respondent No.3 was justified in passing the said Order dated 8th September 2022 without giving the Petitioner a personal hearing on the basis of the replies filed by the Petitioner and the documents on record.
15. We have heard learned Counsel for the parties and have perused the documents on records.
16. Section 75(4) of the CGST/MGST Act reads as under:-
“(4) 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.”
17. From a plain reading of Section 75(4), it is absolutely clear that, even in a case where the person chargeable with tax or penalty has not requested for a personal hearing, the Department is bound to give a personal hearing when an adverse decision is contemplated against such a person. In the present case, by the said Order dated 8th September 2022, a decision adverse to the Petitioner has been passed. In these circumstances, Respondent No.3 was bound to give a personal hearing to the Petitioner before passing the said Order dated 8th September 2022. This would be irrespective of the fact as to whether the Petitioner had asked for such a personal hearing or not.
18. In these circumstances, in the present case, since the said Order dated 8th September 2022, has been passed without giving any personal hearing to the Petitioner, the same is in violation of the principles of natural justice and ex-facie contrary to the provisions of Section 75(4) of the CGST/MGST Act.
19. We are supported in this view by the decisions of the Division Bench of this Court in Kuehne Nagel Private Limited Vs. The State of Maharashtra & Ors. (Writ Petition No. 15210 OF 2023) and Hydro Pneumatic Accessories India Pvt. Ltd. Vs. The Assistant Commissioner of State Tax, Muland West & Anr. (Writ Petition (L) No. 33343 of 2023), of which one of us (Justice G. S. Kulkarni) was a member.
20. In the light of the aforesaid discussion, we dispose of this Writ Petition by the following Orders:-
a. The Impugned Order dated 8th September 2022 passed by Respondent No.3 is hereby quashed and set aside.
b. Respondent No.3 shall give an opportunity of personal hearing to the Petitioner, and, after considering all the contentions of the Petitioner, passed an appropriate Order in accordance with law within a period of four weeks from the date on which a personal hearing is given to the Petitioner.
c. The Rule is made absolute in the aforesaid terms.
d. In the facts and circumstances of the present case, there will be no order as to costs.
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