GST Demand order not valid if adverse order is passed and personl hearing not given : High Court

ORDER

1. Heard finally with the consent of both the parties.

This order shall govern disposal of both the writ petitions viz., W.P. No. 8123/2023 and W.P. No. 8125/2023. Regard being had to the similitude of the controversy involved in the aforesaid petitions, they have been heard analogously and disposed of by this singular order

2. For the sake of convenience, facts of W.P. No. 8123/2023 are taken.

3. The brief facts of the case are that:-

4. Learned counsel for the petitioners submits that a plain reading of Sub Section 4 of Section 75 of the Act makes it clear that providing opportunity of hearing is a mandatory requirement. The said requirement needs to be fulfilled in twin situations :-

(I) When a specific request is received in writing from a person chargeable with tax or where any adverse decision is contemplated against such person. Learned counsel for the petitioners submits that the use of word ‘or’ is very important in this statutory provision. Admittedly, in the present cases, the adverse decision was contemplated on said contemplation is translated into reality, when tax was levied on the petitioners. In that event whether or not the petitioners specifically opted/demanded for a personal hearing, a personal hearing ought to have been provided. In absence thereof, the principles of natural justice and statutory mandate mentioned in Sub Section 4 of Section 75 of the Act are grossly violated.

(II) In support of his submission, learned counsel for the petitioners placed reliance on the judgment of this Court reported in (2023) 4 Centax 198 (M.P.) (19-1-2023) (Ultratech Cement Ltd. v. Union of India), the judgment of Gujarat High Court reported in 2022 (66) G.S.T.L. 38 (Guj.) (23-6-2022) (Graziano Trasmissioni India Pvt. Ltd. v. State of Gujarat) and lastly on a Division Bench judgment of Allahabad High Court reported in 2023 (8) TMI 1091, Allahabad High Court, (M/s. BL Pahariya Medical Store v. State of U.P. And another).

5. Per contra, learned counsel for the State submits that petitioners have not projected requirement of Sub Section 4 of Section 75 of the Act in a proper manner. This provision nowhere talks about opportunity of ‘personal hearing’. On the contrary, it talk about only ‘opportunity of hearing’. Pursuant to the show cause notice issued as prescribed in form DRC-01, the petitioner was required to opt for ‘personal hearing’ which was admittedly not opted and in that event, no fault can be found in the action of the respondents. He placed further reliance in the case of Union of India and Another vs. Jesus Sales Corporation reported in (1996) 4 SCC 69, wherein it is observed that:-

“It shall not be out of place to mention that sub-section (2) of Section 4-M provides specifically that appellant shall be given reasonable opportunity of being heard if he so desires before final order is passed on his appeal. That requirement according to us cannot be read impliedly as an implicit condition in the third proviso to sub-section (1) of Section 4-M. But it need not be impressed that when the Appellate authority has been vested with the discretion to dispense with such deposit unconditionally or on conditions, then it has to apply its mind on that question like a quasi- judicial authority taking into consideration all the facts and circumstances of the case including the undue hardship which has been pointed out on behalf of the appellant. In that proviso the two expressions ‘opinion’ and ‘descretion’ both have been used. In view of the settled position that whenever a statutory authority has to form an opinion on a question, it does not mean that it has to be formed in a subjective or casual manner. That opinion must be formed objectively on relevant considerations. Same is the position in respect of the exercise of discretion. The framers of the Act require such Appellate authority to exercise its discretion in a reasonable and rational manner taking into consideration the relevant facts and circumstances of a particular appeal while considering the question as to whether the deposit of the amount of the penalty be dispensed with unconditionally or subject to the conditions”.

6. We have heard learned counsel for the parties at length and perused the relevant documents.

7. Before dealing with rival contentions, it is apposite to quote Section 75 (4) of GST Act which reads as under:- “(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.”

(Emphasis supplied)

8. A plain reading of sub-section 4 of Section 75 of the Act makes it crystal clear that “opportunity of hearing” must be granted in two situations viz (a) where a request in specific is received in writing from the person chargeable; (b) where any adverse decision is contemplated against such person.

9. This is trite that when language of statute is plain and unambiguous, it should be given effect to irrespective of its consequences. (See Nelson Motis v. Union of India (1992) 4 SCC 711).

10. The language employed in sub-section 4 of Section 75 of the Act leaves no room for any doubt that the word ‘or’ is used by the law makers for a specific purpose. Although, in the first portion of the statute, i.e. sub-section 4 of Section 75 of the Act, the statute talks about a specific request, the portion after the word ‘or’ makes it clear like cloudless sky that opportunity of hearing is required to be given, even in those cases where no such request is made but adverse decision is contemplated against such person. We find support in our view by the Division Bench judgment of Allahabad High Court in M/s. BL Pahariya Medical Store (supra).

11. The ancillary question springs up from the argument of learned Government Advocate for the State whether the expression ‘opportunity of hearing’ is fulfilled if reply to show cause notice is received. We find substance in the arguments of learned counsel for the petitioners that even law makers while prescribing the statutory form has visualized different stages for the purpose of ‘personal hearing’. The one stage is when the reply is submitted and the other stage is date, venue and time of the personal hearing. Thus, we are unable to persuade ourselves with the line of argument of learned Government Advocate that ‘opportunity of hearing’ does not include the opportunity of ‘personal hearing’.

12. In the instant case whether or not the petitioners have specifically asked for personal hearing, fact remains that the adverse decision was contemplated against the petitioners. In that event, it was obligatory and mandatory on the part of respondents to provide the petitioners opportunity of personal hearing. Admittedly, no opportunity of personal hearing has been provided in both the matters. Resultantly, the decision making process adopted by the respondents is vitiated and runs contrary to the principles of natural justice and statutory requirement of sub-section 4 of Section 75 of GST Act. (See Graziano Trasmissioni India Pvt. Ltd. (supra).

13. As a result, the impugned proceedings after the stage of reply of show cause notices, in both the cases are set-aside. The respondents shall provide opportunity of hearing to the petitioners in both the cases by some other officer than the officer who has issued the show cause notice as per Ultratech Cement Ltd. (supra).

14. Both the writ petitions are disposed of.

15. It is made clear that this Court has not expressed any opinion on merits of the case.

16. A copy of this order be placed in the record of W.P. No. 8125/2023.