2025 (6) TMI 743 - HC - GST

Violation of sub-section (4) of Section 75 of the Central Goods and Services Tax Act 2017 - passing an order of assessment without affording an opportunity of personal hearing to the petitioner - violation of principles of natural justice - HELD THAT - The Appellate Authority failed to appreciate that the order impugned results in civil consequences and any proceedings which results in civil consequences to the petitioner are required to be passed after affording an opportunity of hearing. In the case of CGST Act the Act itself and in particular sub-section (4) of Section 75 mandates that an opportunity of personal hearing ought to be given to the parties concerned more so when the authorities contemplate an order adverse to the interest of the assessee. The Appellate Authority has failed to appreciate the settled position in law that no order affecting civil rights of a citizen can be passed without affording an opportunity of hearing and also failed to appreciate the fact that the mandate and the scheme of the Act itself has been violated by the concerned authorities. The order impugned is set-aside. The matter is remitted back to the Appellate Authority for re-consideration in accordance with law - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the Assessing Officer committed a violation of sub-section (4) of Section 75 of the Central Goods and Services Tax Act, 2017 ("CGST Act") by passing an order of assessment without affording an opportunity of personal hearing to the petitioner, despite the order being adverse to the petitioner's interest;

(b) Whether the mandate of sub-section (4) of Section 75 of the CGST Act is mandatory, requiring strict compliance in cases where an adverse order is contemplated, even in the absence of a written request for personal hearing by the assessee;

(c) Whether the alternate remedy available under the law, including appellate proceedings, can be invoked where the initial assessment order was passed without affording the mandatory personal hearing;

(d) Whether the appellate authority erred in rejecting the petitioner's appeal on the ground of limitation without appreciating the violation of the statutory mandate and the civil consequences resulting from the impugned order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Whether the Assessing Officer violated sub-section (4) of Section 75 of the CGST Act by not affording personal hearing when an adverse order was passed, and whether such mandate is mandatory

The Court examined the provisions of Section 75 of the CGST Act, which governs the procedure for determination of tax by the Assessing Authority. Sub-section (4) specifically requires the Assessing Authority to afford an opportunity of personal hearing either when the assessee requests it in writing or when an adverse order is contemplated against the assessee. The Court emphasized that the provision is couched in mandatory terms and compliance is imperative.

In interpreting the statutory mandate, the Court relied on authoritative precedents, including the recent judgment of the Supreme Court in the case of Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors., where it was held that "where a statute requires one to do a certain thing in a certain manner, it must be done in that particular manner or not at all." The Court also extracted from the judgment in A. R. Antulay v. Ramdas Sriniwas Nayak the principle that "other methods of performance are necessarily forbidden."

Further, the Court cited Sharif-ud-Din v. Abdul Gani Lone to reinforce that if the object of a law would be defeated by non-compliance, the provision must be regarded as mandatory and failure to comply attracts the specified consequence. This establishes that the opportunity of personal hearing is a procedural safeguard designed to protect the assessee's civil rights and cannot be dispensed with when an adverse order is contemplated.

Applying these principles, the Court found that since the Assessing Officer had passed an order adverse to the petitioner's interest, the statutory mandate to afford personal hearing was triggered mandatorily, regardless of whether the petitioner made a written request for the same. The Assessing Officer's failure to comply with this requirement amounted to a violation of the CGST Act.

Issue (c): Availability and invocation of alternate remedy despite non-compliance with mandatory procedure

The State's counsel relied on an earlier decision of the High Court in a different writ petition to contend that the petitioner should pursue alternate remedies under the law instead of challenging the assessment order on procedural grounds. However, the Court distinguished the facts of the present case from the earlier decision, noting that in the prior case, the Court did not enter into the merits of the mandatory nature of sub-section (4) of Section 75 and relegated parties to alternate remedies.

In the instant matter, the petitioner had already availed the alternate remedy by approaching the Appellate Authority, which rejected the appeal solely on the ground of limitation without addressing the substantive issue of non-compliance with the mandatory hearing requirement. The Court emphasized that where an order has civil consequences, it must be passed only after affording the opportunity of hearing, and the failure to do so cannot be cured merely by invoking alternate remedies.

Issue (d): The appellate authority's rejection of the appeal on limitation grounds without appreciating the procedural violation and civil consequences

The Court found that the Appellate Authority erred in dismissing the petitioner's appeal on the ground of limitation without considering the fundamental violation of the statutory mandate under sub-section (4) of Section 75. The Court underscored that the impugned order had civil consequences affecting the petitioner's rights, and thus, procedural safeguards must be strictly adhered to.

The Court observed that the failure to afford personal hearing before passing an adverse order vitiates the order itself, and the appellate authority's refusal to entertain the appeal on limitation grounds, without addressing this core procedural lapse, was legally unsustainable.

3. SIGNIFICANT HOLDINGS

The Court held:

"Where a statute requires one to do a certain thing in a certain manner, it must be done in that particular manner or not at all."

"The scheme of the Act mandates that, in either of the two circumstances, a personal hearing is required to be given to the party, who either makes a written request, or against whom the authorities contemplate an adverse order."

"No order, affecting civil rights of a citizen, can be passed without affording an opportunity of hearing."

"The Appellate Authority has failed to appreciate the settled position in law that no order, affecting civil rights of a citizen, can be passed without affording an opportunity of hearing, and also failed to appreciate the fact that the mandate, and the scheme of the Act itself, has been violated by the concerned authorities."

Accordingly, the Court set aside the impugned order of assessment and remitted the matter back to the Appellate Authority for reconsideration in accordance with law, ensuring compliance with the mandatory requirement of affording an opportunity of personal hearing before passing any adverse order.