2025 (6) TMI 1649 - HC - GST

Challenge to order of determination under Section 73 of the Central Goods and Services Tax Act 2017 - petitioner was entitled to cross-examine the officer or not - principles of natural justice - HELD THAT - Though respondents pleaded that an opportunity of hearing was granted to the petitioner on 06.06.2024 there is nothing to indicate that the petitioner was served with any notice indicating the grant of such an opportunity. Notwithstanding the above as on the date petitioner filed the writ petition no final orders were passed and this Court had granted an interim stay. However the day after the stay expired as the case had not come up in Court despite direction to post the case on a particular date final orders were issued as Ext.P11 imposing liability on the petitioner. When this Court was in seizin of the matter and had even granted an interim order it would have been only appropriate for the first respondent to have waited till the writ petition was disposed of especially since the grant of an opportunity of cross- examination was being considered by the court. Section 75(4) of the CGST Act mandates that an opportunity of hearing must be granted to the tax payer if any adverse orders are issued. Therefore even if the stay had expired petitioner ought to have granted an opportunity of hearing. Conclusion - There is nothing to indicate that petitioner was issued with a notice granting an opportunity of hearing atleast after the stay expired. The first respondent ought to have issued a fresh notice granting an opportunity of hearing to the petitioner before passing Ext.P11 order and that having not been done the impugned order Ext.P11 is issued in violation of the principles of natural justice. Ext.P11 order is set aside and the first respondent is directed to pass fresh orders after granting an opportunity of hearing to the petitioner with sufficient notice - petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the impugned order of determination passed under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) is valid, considering the petitioner's request for cross-examination of a departmental officer and the grant of opportunity of hearing.

- Whether the principles of natural justice were violated by passing the order without granting a fresh opportunity of hearing after the interim stay granted by the Court expired.

- Whether the petitioner was entitled to cross-examine the 4th respondent, an officer of the Public Works Department, whose statements and information were relied upon in the show cause notice.

- The proper procedural compliance under Section 75(4) of the CGST Act regarding the issuance of opportunity of hearing before passing any adverse order.

- The adequacy and legality of the procedure followed by the tax authorities in concluding the proceedings despite the pendency of the writ petition and the interim stay granted by the Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the impugned order passed under Section 73 of the CGST Act

The CGST Act, 2017, under Section 73, empowers tax authorities to determine tax not paid or short paid, along with interest and penalty. The petitioner challenged Ext.P11 order determining liability of Rs.30,76,070/- imposed under Section 73. The petitioner contended that the order was passed without granting a proper opportunity of hearing and without allowing cross-examination of relevant departmental officers.

The Court noted that the petitioner had initially sought an opportunity to cross-examine the 4th respondent and requested copies of documents relied upon in the show cause notice. The petitioner's request was made in the reply to the show cause notice (Ext.P10). The respondents denied the necessity for cross-examination and claimed that an opportunity of personal hearing was granted on 06.06.2024, which the petitioner did not avail. However, the Court found no evidence that such a hearing notice was served on the petitioner.

The Court observed that the writ petition was admitted and interim stay granted on 21.06.2024, which was extended multiple times but expired on 30.08.2024. Despite the stay, the impugned order was passed on 31.08.2024. The Court held that the tax authorities should have awaited disposal of the writ petition or at least granted a fresh opportunity of hearing after the stay expired. The failure to do so violated the mandatory procedural safeguards under the CGST Act and principles of natural justice.

Issue 2: Violation of principles of natural justice and procedural safeguards under Section 75(4) of the CGST Act

Section 75(4) mandates that before passing any adverse order, the taxpayer must be granted an opportunity of hearing. The Court emphasized that even if the interim stay granted by the Court expired, the authorities were under a legal obligation to issue a fresh notice granting an opportunity of hearing before passing the order.

The Court found no material to show that the petitioner was served with any such fresh notice after the stay expired. Consequently, the passing of Ext.P11 order without such notice was held to be in violation of natural justice. The Court reiterated that the grant of hearing is a fundamental procedural requirement and cannot be bypassed.

Issue 3: Necessity and entitlement to cross-examination of the 4th respondent

The petitioner contended that the information collected by the tax authorities from the 4th respondent, an officer of the Public Works Department, was prejudicial and that the petitioner should be allowed to cross-examine him to test the veracity and correctness of such information. The Court analyzed the nature of the contentions raised by the petitioner, which were intricately connected with the information provided by the 4th respondent.

The Court held that considering the complexity and nature of the allegations, an opportunity for cross-examination was necessary to ensure a fair and just adjudication. The Court observed that denying such an opportunity would prejudice the petitioner's right to a fair hearing.

Issue 4: Adequacy and legality of procedure followed by tax authorities in concluding proceedings

The Court scrutinized the conduct of the tax authorities in proceeding with the final order immediately after the interim stay expired, without awaiting the writ petition's disposal or granting a fresh hearing opportunity. The Court found this approach to be procedurally flawed and contrary to the principles of natural justice and statutory mandate.

The Court noted that the petitioner was entitled to copies of documents relied upon, and if requested, the authorities must provide them as per law. It also directed that the petitioner must participate in the proceedings without seeking further adjournments to avoid undue delay.

3. SIGNIFICANT HOLDINGS

- "Section 75(4) of the CGST Act mandates that an opportunity of hearing must be granted to the tax payer, if any adverse orders are issued."

- "The first respondent ought to have issued a fresh notice granting an opportunity of hearing to the petitioner before passing Ext.P11 order and that having not been done, I am of the view that the impugned order Ext.P11 is issued in violation of the principles of natural justice."

- "Considering the nature of contentions raised in the reply notice to the intimation of discrepancy as well as to the show cause notice under Section 73, I am of the view that the opportunity of cross-examination of the 4th respondent was necessary."

- The Court set aside the impugned order and directed the tax authorities to pass fresh orders after granting a proper opportunity of hearing and allowing cross-examination of the 4th respondent.

- The Court excluded the period during which the writ petition was stayed from the limitation period for passing fresh orders and mandated that the petitioner must participate without seeking further adjournments.