Natural Justice: Mandatory Personal Hearing After Reply Submission in Section 74 Proceedings

The Legal Issue

Can a GST demand order be legally sustained if the personal hearing was scheduled before the taxpayer filed their reply, and no subsequent hearing was granted after the reply was submitted?

Facts of the Case

The Notice: The petitioner received a Show Cause Notice (SCN) under Section 74 (fraud/suppression category) alleging short payment of tax and irregular ITC.
The Timeline:
- Hearing Dates: The Department fixed hearing dates prior to the reply submission.
- Reply Filed: The petitioner filed a detailed reply on August 19, 2025, which was duly acknowledged on the portal.
- The Order: On December 18, 2025, the Proper Officer passed an order confirming the demand.
The Flaw: The order acknowledged the August reply but noted that the “hearings” had already concluded before that date. No new hearing was fixed once the reply was on record.
The Challenge: The petitioner filed a Writ Petition in the Allahabad High Court, arguing that the order was “non-speaking” (lacked reasoning) and that the “hearing” was a sham since it preceded their defense.

The Decision

The High Court quashed the demand and ruled in favor of the taxpayer, emphasizing the following principles of Natural Justice:

Logical Sequence of Adjudication: The Court held that a “meaningful hearing” can only take place after the reply is filed. A hearing held before the reply is submitted is an empty formality because the officer hasn’t yet considered the taxpayer’s written defense.
Statutory Mandate (Section 75(4)): Under the CGST Act, a personal hearing is mandatory whenever an adverse decision is contemplated. The Court noted that since the last hearing date preceded the reply, the authority was obligated to fix a fresh date after August 19, 2025.
Non-Speaking Orders: The Court criticized the order for simply reproducing the SCN and the reply without providing independent analysis. Generic findings without “application of mind” violate the constitutional standards of fairness under Article 14.
Remand: The impugned order was set aside. The matter was sent back (remanded) to the authority to pass a fresh, reasoned order only after granting a proper personal hearing where the petitioner can explain their reply.

Key Takeaways for Taxpayers

Check the Sequence: If your GST order mentions hearing dates that are earlier than your reply date, the order is likely procedurally void.
Demand a “Speaking Order”: An officer cannot just say “reply not convincing.” They must explain why each point of your reply was rejected.
Writ Remedy: If the Department proceeds ex parte without granting a hearing after your reply is filed, you can approach the High Court directly via a Writ Petition, as this constitutes a fundamental breach of natural justice.

HIGH COURT OF ALLAHABAD

Ramnayan Yadav Contractor

Union of India^*

Saumitra Dayal Singh and INDRAJEET SHUKLA, JJ.

WRIT TAX No. 699 of 2026

FEBRUARY 5, 2026

Ajay Kumar Yadav, Ashish Bansal and Shalini Goel for the Petitioner. Dhananjay Awasthi, Ramesh Chandra Shukla and Vijay Chandra for the Respondent.

ORDER

1. Heard Sri Ajay Kumar Yadav, learned counsel for the petitioner; Sri R.C. Shukla, learned Standing Counsel for the State-respondents and Sri Vijay Chandra, learned counsel for the Union of India.

2. Challenge has been raised to the order dated 18.12.2025 passed by respondent no.2 under Section 74 of the Act.

3. Short submissions have been advanced that the impugned order dated 18.12.2025 passed by Sri Braj Kishore Vidyarthi, Assistant Commissioner CGST & Central Excise Division-Azamgarh under Section 74 of the Act is wholly non-speaking.

4. On the other hand, learned Standing Counsel has raised a preliminary objection that the petitioner has statutory remedy of appeal. Therefore, the present writ petition may not be entertained.

5. Having heard learned counsel for the parties and having perused the record, the petitioner was issued a show-cause notice on 05.08.2024 whereby the petitioner was required to show cause as below :

“Now, therefore, M/S RAMNAYAN YADAV CONTRACTER, Legal Name-RAMNAYAN YADAV having their Principal Place of Business 0, BABHANULI MAFI UCHA GON, SADAR AZAMGARH, Azamgarh, Uttar Pradesh, 276128 is hereby required to show cause to the Deputy/ Assistant Commissioner, CGST & Central Excise Division-Azamgarh having office address at H. No. 89, Mohalla Belaisa, Near Sanjay Petrol Pump, Azamgarh-276001 within 30 days of receipts of this notice as to why :-

(a) Short payment of GST amounting to Rs, 47,01,682/- (CGST- Rs. 23,50,841/- + SGST- Rs. 23,50,841/-) [Rupees Fourty Seven Lakh One Thousand Six Hundred Eighty Two only as discussed in the foregoing para should not be demanded and recovered from the party under section 74(1) of the Central GST Act, 2017 and corresponding UPGST Act, 2017 along with interest under section 50 of the Central GST Act, 2017 and UPGST Act, 2017. As on being pointed out about the short/ non-payment of GST during the investigation, the party has made the payment of GST amounting to Rs.27,85,744/- (CGST of Rs. 13,92,872/- and SGST of Rs. 13,92,872/-) through GSTR-3B for the month of March-22 on 25.10.2022. The same amount should be appropriated under the respective heads against their short paid GST liabilities.

(b) Excess availment of Input Tax Credit of Rs.27,56,828/- (CGST- Rs. 13,78,414/- & SGST-13,78,469/- [Rupees Twenty Seven Lakh Fifty Six Thousand Eight Hundred Twenty Eight only] as discussed in the foregoing para should not be demanded and recovered from the party under section 74(1) of the Central GST Act, 2017 and corresponding UPGST Act, 2017 along with interest under section 50 of the Central GST Act, 2017 and UPGST Act, 2017.

(c) Wrong availment of Input Tax Credit of Rs.31,34,336/- (CGST- Rs. 15,67,168/- & SGST- Rs. 15,67,168/-) [Thirty One Lakh Thirty Four Thousand Three Hundred Thirty Six Only as discussed in the foregoing para should not be demanded and recovered from the party under section 74(1) of the Central GST Act, 2017 and corresponding UPGST Act, 2017 along with interest under section 50 of the Central GST Act, 2017 and UPGST Act, 2017.

(e) The penalty should not be imposed upon them under Section 122 (2) (b) of the CGST Act, 2017 read with Section 74 (1) of the Act and corresponding UPGST Act, 2017 for wilful mis-statement and suppression of the facts with intent to evade the short paid GST, Excess availment of ITC and Wrong availment of ITC as referred in respect of para (a), (b) & (c) above.

(e) Interest amounting to Rs.9,95,186/- (CGST- Rs.4,97,593/- & SGST-Rs.4,97,593/-) [Rupees Nine Lakh Ninty Five Thousand One Hundred Eighty Six only] should not be recovered on delayed payment of GST through cash in their GSTR-3B returns under section 50 (1) of the Central GST Act, 2017 and of the UP GST Act, 2017.”

6. The petitioner disputed the demand and furnished reply on 19.08.2025. Copy of the same has been annexed as Annexure No. 9 to the writ petition. Clearly, the said reply was uploaded. Acknowledgement of the same also exists.

7. Thereafter, according to the petitioner no opportunity of hearing was given. Perusal of the impugned order reveals that after taking note of the contents of the show-cause notice, reminders were sent to the noticee fixing date 17.12.2024, 23.12.2024 and 06.01.2025 for personal hearing. The above narration appears to be self-conflicted or incomplete. At first, it has been observed that the last date for personal hearing fixed was 06.01.2025 and thereafter it has been observed that the written reply was furnished by the petitioner on 19.08.2025. What transpired between 06.01.2025 and 19.08.2025 is not clear. Materially, there is no narration in the impugned order that any notice for personal hearing was issued to the petitioner for any date beyond 19.08.2025, when it had first filed its reply to the show-cause notice.

8. It is in the very nature of things that need/stage to grant opportunity for personal hearing may arise only after written reply may have been entertained. Only in rare cases where a noticee may choose to not file any reply he be heard on the show-cause notice itself. Generally, occasion may arise to grant opportunity for personal hearing before any written reply is furnished. To the extent in the present facts, the petitioner had filed reply on 19.08.2025. The date fixed for personal hearing should have been fixed thereafter. If the petitioner had failed to appear on such dates only then the matter may have been proceeded ex parte.

9. From the narration contained in paragraph no.3 of the impugned order, it is not clear if any opportunity of hearing was granted to the petitioner after 19.08.2025. To that extent, violation of principles of natural justice is made out.

10. Then, more materially, if not shockingly after writing more than 30 pages of the order which contain nothing more than extract of the showcause notice and the extract of the written reply dated 19.08.2025, under the heading ‘Discussion And Findings’, only this much has been observed “

“Discussion And Findings:-

5. I have carefully gone through the records of the case, details and facts mentioned in the impugned show cause notice, noticee’s submission in response to the notice and all other facts available on records. I find that the submission of the noticee is not appropriate in respect of the impugned show cause notice. Further the noticee also failed to furnish all the supporting documents in respect of its reply dated 19.08.2025. Therefore, in my opinion the demand raised in the impugned show cause notice is sustainable.”

11. On the face of it, Sri Sri Braj Kishore Vidyarthi, Assistant Commissioner CGST & Central Excise Division-Azamgarh has failed to apply his mind to any part of the reply furnished by the petitioner. He further appears to have failed to apply his mind to the demand proposed against the petitioner. He has first recorded the contents of the show-cause notice and thereafter extracted the reply. Without assigning any reason, he has confirmed the demand of tax and penalty.

12. The lack of application of mind is apparent on the face of record and requires no discussion by this Court. By making wholly vague and generic observations that he had considered all material available on record or that submission of the noticee is not ‘appropriate’ or that the noticee has failed to furnish ‘all supporting document in respect of its reply dated 19.08.2025’, there is no consideration offered to the reply and there is no reasoning given to the fact contentions raised by the petitioner.

13. If the reply to the show-cause notice was lacking in any part, for which reason the explanation furnished by the petitioner was to be rejected it was incumbent on the adjudicating authority to discuss the same and record his reasons to draw that conclusion.

14. Accordingly, the impugned order dated 18.12.2025 passed by Sri Braj Kishore Vidyarthi, Assistant Commissioner CGST & Central Excise Division-Azamgarh is set aside. The matter is remitted to the adjudicating authority to pass a fresh order after affording due opportunity of personal hearing to the petitioner. Prima facie, if the adjudicating authority is not convinced with the explanation furnished, it is expected that the petitioner would be given opportunity to explain the doubts that may exist with the adjudicating authority and cogent reasons would be recorded to reject the fact explanation furnished by the petitioner.

15. With the aforesaid observation, present writ petition is disposed of.

16. Let a copy of this order be communicated to the Central Board of Indirect Taxes and Customs for necessary compliance to ensure all A djudicating Authority, comply with the minimal requirements of law with respect to grant of adequate opportunity to file reply, opportunity of personal hearing and, recording of reasons, as may not present frivolous litigation and frivolous demands being raised.