Background

This case revolves around an assessment order dated 28.12.2022 for the assessment year 2021-2022. The petitioner, Sendhil Kumar, challenged this order on the grounds that no personal hearing was afforded to him during the impugned assessment proceedings. 

In the contested assessment order, the tax liability of the petitioner was determined under the CGST and SGST at Rs.4,44,292/- and a penalty of Rs.4,44,292/- was imposed, totaling a sum of Rs.8,88,584/-

Controversy in Question

The petitioner contended that as per Section 75 (4) of the GST Act, 2017, a personal hearing should have been afforded to him since an adverse decision was taken by the respondent under the impugned assessment order. 

The controversy lies in the fact that no personal hearing was granted to the petitioner as contemplated under Section 75 (4) of the GST Act, 2017. This led to the quashing of the impugned assessment order on the grounds of violation of the principles of natural justice.

Prayer of the Applicant

The petitioner, Sendhil Kumar, filed a Writ Petition under Article 226 of the Constitution of India. The prayer sought the following:

• To issue a Writ of Certiorarified Mandamus, calling for the impugned proceedings of the respondent passed in GSTIN: 33CZZPS5829R1ZW/2021-22 dated 28.12.2022.
• To quash the same as the impugned proceedings of the respondent is in violation of principles of natural justice, disregard to the provisions of the TNGST Act / Rules 2017.
• To further direct the respondent to re-do the adjudication in accordance with law.

Legal Issues Involved

The primary legal issue in the case pertains to the interpretation and application of Section 75 (4) of the GST Act, 2017. This section states:

“(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.”

The petitioner contends that this provision mandates that a personal hearing should be granted whenever the respondent contemplates any adverse decision against the assessee, regardless of whether a request for a hearing has been received from the assessee or not.

This interpretation of Section 75(4) of the GST Act, 2017 has been upheld by two Honourable Judges of the High Court in their respective decisions, Golden Homes Private Limited vs State Tax Officer and the other Ayyanar Steel Trading vs State Tax Officer (Intelligence). Both decisions concurred that a right of personal hearing to the assessee is mandatory whenever the respondent contemplates any adverse decision in the assessment proceedings.

Arguments made by Applicant

The advocate for the petitioner, Mr. N. Murali, challenged the impugned assessment order on the following grounds:

1. The petitioner was not afforded a personal hearing during the impugned assessment proceedings, which is a violation of Section 75 (4) of the GST Act, 2017.
2. The respondent took an adverse decision under the impugned assessment order. As per Section 75 (4) of the GST Act, 2017, a personal hearing should have been granted to the petitioner in such a case.
3. The advocate cited two previous decisions of the High Court, one dated 08.03.2021 passed in W.P.Nos.2049 and 2050 of 2021 and the other dated 06.09.2021 passed in W.P.No.18582 of 2021. In both decisions, the Court upheld that a right of personal hearing to the assessee is mandatory whenever the respondent contemplates any adverse decision in the assessment proceedings.

The respondent, The State Tax Officer, Tiruvallur Assessment Circle, defended the assessment order that was challenged by the petitioner.

Important Observations of the Court

• If the respondent decides to make a decision against the assessee, whether or not a hearing request has been received from the assessee, they are required to provide a personal hearing to the assessee, who is the petitioner in this case.

“As seen from Section 75 (4) of the Act, whenever the respondent contemplates any adverse decision against the assessee, whether a request is received from the assessee for hearing or not, the respondent will have to grant personal hearing to the assessee, the petitioner herein.” (Page 2, Para 4)

• As previously mentioned, in both cases, Golden Homes Private Limited vs State Tax Officer and Ayyanar Steel Trading vs State Tax Officer (Intelligence), the judges unanimously ruled that providing the assessee with a right to a personal hearing is mandatory whenever the respondent considers making an adverse decision during the assessment proceedings.

“Section 75(4) of the GST Act, 2017 was also interpreted by two Honourable Judges of this Court in their respective decisions. One dated 08.03.2021 passed in W.P.Nos.2049 and 2050 of 2021 and the other dated 06.09.2021 passed in W.P.No.18582 of 2021. In both the aforesaid decisions, the learned Judges of this Court have concurrently upheld that a right of personal hearing to the assessee is mandatory whenever the respondent contemplates any adverse decision in the assessment proceedings” (Page 2, Para 5)

“This Court is in agreement with the view taken by the learned Judges of this Court in the aforesaid decisions.” (Page 2, Para 6)

• The petitioner was not given a chance for a personal hearing during the assessment proceedings, as evident from the assessment order. The respondent made an unfavorable decision against the petitioner in this order. As a result, the assessment order must be nullified due to a violation of the principles of natural justice, given that the petitioner’s right to a personal hearing was denied.

“Admittedly, no personal hearing was afforded to the petitioner in the impugned assessment proceedings as seen from the impugned assessment order. An adverse decision has also been taken by the respondent against the petitioner in the impugned assessment order. Therefore, necessarily the impugned assessment order has to be quashed on the ground of violation of the principles of natural justice as no personal hearing has been granted to the petitioner as contemplated under Section 75 (4) of the GST Act, 2017 and remanded back to the respondent for fresh consideration on merits and in accordance with law.”

• Hence, the court has quashed the assessment order and sent the case back to the respondent for a new evaluation in accordance with law. The respondent is to make a decision within twelve weeks of receiving a copy of this order, ensuring fairness by following natural justice principles and allowing the petitioner to have a personal hearing.

“In the result, the assessment order dated 28.12.2022 is hereby quashed and the matter is remanded back to the respondent for fresh consideration on merits and in accordance with law. The respondent shall pass final orders within a period of twelve weeks from the date of receipt of a copy of this order, after adhering to the principles of natural justice and after granting the petitioner the right of personal hearing on 16.03.2023 at 10:30 a.m.” (Page 3, Para 8) 

Important Provisions of Law

Section 75 (4) of the GST Act, 2017 :

“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.” 

The court interpreted this provision to mean that a personal hearing is mandatory whenever the respondent contemplates any adverse decision in the assessment proceedings, regardless of whether a request for a hearing has been received from the assessee or not. This interpretation was upheld by two previous decisions of the High Court.

Conclusion

The court, in its judgement, upheld the principles of natural justice and the provisions of Section 75 (4) of the GST Act, 2017. The court observed that the respondent had taken an adverse decision against the petitioner without affording a personal hearing, which was a violation of the principles of natural justice.

As a result, the assessment order dated 28.12.2022 was quashed, and the matter was remanded back to the respondent for fresh consideration on merits and in accordance with law. The respondent was directed to pass final orders within a period of twelve weeks from the date of receipt of a copy of this order, after adhering to the principles of natural justice and after granting the petitioner the right of personal hearing on 16.03.2023 at 10:30 a.m.

Judgements Referred 

The following judgments were referenced in the case:

1. Golden Homes Private Limited vs State Tax Officer – Judgment dated 08.03.2021 passed in W.P.Nos.2049 and 2050 of 2021
2. Ayyanar Steel Trading vs State Tax Officer (Intelligence) – Judgment dated 06.09.2021 passed in W.P.No.18582 of 2021 

Both of these judgments interpreted Section 75(4) of the GST Act, 2017 and upheld that a right of personal hearing to the assessee is mandatory whenever the respondent contemplates any adverse decision in the assessment proceedings.

 

Author: Parthvi Patel, United World School of Law