2025 (7) TMI 1324 - HC - GST

Wrongful availment of Input Tax Credit (ITC) - SCN not served upon the Petitioners - violation of principles of natural justice - HELD THAT - Non-service of SCN and non-affording of personal hearing would be a clear breach of the principles of natural justice. In view of the same the impugned order-in-original qua the Petitioners would not sustain. Accordingly only the demands raised in respect of the Petitioners under the impugned order-in-original are set aside. After considering the reply and the submissions of the Petitioners the SCN qua the Petitioners shall be adjudicated afresh by the Adjudicating Authority - Petition disposed off.

Summary

ISSUES:

Whether the non-service of the Show Cause Notice (SCN) and non-affording of personal hearing violates the principles of natural justice.Whether the demand raised under Section 74(1) of the CGST Act, 2017 along with interest and penalty can be sustained without proper service of SCN and opportunity to be heard.The scope and procedure for adjudication of GST demands involving alleged fraudulent availment of Input Tax Credit (ITC).

RULINGS / HOLDINGS:

Non-service of the SCN and non-affording of personal hearing constitutes a "clear breach of the principles of natural justice," rendering the impugned order-in-original unsustainable against the Petitioners.The demands raised under the impugned order-in-original are set aside solely on the ground of procedural infirmity relating to non-service and lack of hearing.The Petitioners must be given an opportunity to file a reply within 30 days and be granted access to the GST portal to enable proper adjudication.The SCN shall be adjudicated afresh by the Adjudicating Authority after considering the reply and submissions of the Petitioners.

RATIONALE:

The Court applied the principles of natural justice which mandate that a party must be given notice and an opportunity to be heard before adverse orders are passed.The statutory framework under the CGST Act, 2017, particularly Sections 74(1), 50, and 122(1), requires issuance and service of a SCN and personal hearing before raising demands for tax, interest, and penalty.The Court relied on the absence of proof of service of the SCN on the Petitioners and the lack of any personal hearing as fatal procedural defects.No substantive adjudication on the merits of the alleged fraudulent availment of ITC was made; the decision was strictly on procedural grounds.