Failure to give proper opportunity of hearing renders the ex-parte order null and void.

Issue

Whether an ex-parte order under Section 73 of the CGST Act is legally sustainable when the show cause notice provided a personal hearing date before the due date for submitting a written reply, thereby violating the fundamental principle of a fair hearing.

Brief Facts

A show cause notice (SCN) in Form GST DRC-01 was issued to the assessee for a tax demand under Section 73. Upon review, it was discovered that the SCN set the date for a personal hearing on June 19, 2024, but gave the assessee until June 22, 2024, to submit their written reply. Because of this flawed timeline, no personal hearing was conducted, and an ex-parte order was passed against the assessee, who subsequently challenged it.

Decision

The court found the timing of the hearing to be a clear violation of the principles of natural justice, specifically the right to be heard (audi alteram partem). The court reasoned that a hearing cannot reasonably take place before the assessee has had the opportunity to file their defense. Therefore, the impugned ex-parte order was set aside, and the tax authorities were directed to issue a fresh notice and provide a proper opportunity for the assessee to submit a reply and be heard.

Key Takeaways

• Natural Justice is a Prerequisite: A demand order passed by a tax authority without affording a proper opportunity for the assessee to be heard is procedurally flawed and legally indefensible. The principles of natural justice are sacrosanct and must be followed.
• A Fair Hearing Requires Proper Sequencing: An assessee must be given a reasonable period of time to prepare and file a written reply to a show cause notice before being called for a personal hearing. A hearing date scheduled before the reply deadline renders the entire process unfair and nullifies any subsequent order.
• Remedy for Procedural Defects: When a tax order is quashed due to procedural defects, the court’s usual remedy is not to exonerate the assessee entirely but to set aside the order and direct the tax authority to reinitiate the proceedings from the point of the error, ensuring due process is followed this time. This ensures that justice is not only done but is seen to be done.