Providing opportunity of hearing ensures natural justice and allows Revenue Department to pass appropriate orders

The Hon'ble Allahabad High Court in M/s Mohan Agencies v. State of U.P. And Another [Writ Tax No. 58 of 2023 dated February 13, 2023] has set aside the order passed by the Revenue Department, on the grounds that the opportunity of personal hearing was not given to the assessee, as the same was not opted by the assessee in reply to the Show Cause Notice ("theSCN"). Held that, providing the opportunity of hearing would ensure observance of rules of natural justice and allow the Respondent to pass appropriate and reasoned orders in order to serve the interest of justice and allow a better appreciation to arise at the appeal stage. Remitted the matter back to the Revenue Department.

Facts

This petition has been filed by M/s Mohan Agencies("the Petitioner") challenging the order dated October 21, 2022 ("the Impugned Order") passed by the Revenue Department ("the Respondent") for the tax period July, 2017 to March, 2018 whereby, the demand in excess to INR 10 crores was raised against the Petitioner, on the ground that the SCN dated May 13, 2022 was issued to the Petitioner seeking reply wherein, the opportunity of personal hearing was not given.

The Respondent contended that the Petitioner was denied opportunity of hearing because the Petitioner had tick marked the option 'No' against the option for personal hearing in the reply to the SCN on September 14, 2022, submitted through online mode.

Issue

Whether the Petitioner is entitled to get opportunity of personal hearing after declining the same in reply to the SCN?

Held

The Hon'ble Allahabad High Court in Writ Tax No. 58 of 2023 held as under:

• Analyzed Section 75(4) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") wherein, it is stated that 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.
• Relied on the earlier judgment of Bharat Mint & Allied Chemicals v. Commissioner Commercial Tax & Ors. [(2022) 48 VLJ 325 dated December 15, 2022] wherein, it was held that a person/assessee is not required to request for opportunity of personal hearing and it is mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order.
• Observed that, once it has been laid down by way of a principle of law that a person/assessee is not required to request for "opportunity of personal hearing" and it remained mandatory upon the Respondent to afford such opportunity before passing an adverse order, the fact that the Petitioner may have signified 'No' in the column meant to mark the its choice to avail personal hearing, would bear no legal consequence.
• Stated that, principle of natural justice would bind the Respondent to always ensure to provide such opportunity of hearing and it has to be ensured that such opportunity is granted in real terms.
• Noted that, the stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted and only after providing such opportunity the explanation furnished may be rejected and demand created.
• Held that, providing the opportunity of hearing would ensure observance of rules of natural justice and allow the Respondent to pass appropriate and reasoned orders in order to serve the interest of justice and allow a better appreciation to arise at the appeal stage.
• Set aside the Impugned order.
• Remitted the matter back to the Respondent to issue fresh notice to the Petitioner within two weeks.

Relevant Provisions

Section 75(4) of the CGST Act

"General provisions relating to determination of tax

(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."