GST Demand Quashed as SCN Marked ‘NA’ for Hearing Violates Natural Justice.
Issue
Whether a GST demand order is legally valid if the show-cause notice (SCN) and reminder did not offer an opportunity for a personal hearing (by marking it ‘NA’), even if the assessee did not file a written reply.
Facts
- An SCN under Section 73(1) and a subsequent reminder were issued to the assessee.
- These notices called for a written reply but specified ‘NA’ (Not Applicable) in the column for the date of a personal hearing.
- The department passed the final demand order without conducting any personal hearing.
- The assessee challenged the order as a violation of the principles of natural justice.
Decision
- The High Court set aside the impugned demand order.
- It held that the law (Section 75(4)) prescribes a dual requirement: an opportunity to file a written reply and an opportunity for an oral hearing.
- These two requirements are independent, and both must be satisfied.
- The failure to avail one opportunity (like filing a reply) does not automatically lead to the denial of the other (the personal hearing).
- Since the order was passed contrary to this mandatory procedure, it was invalid and the matter was remanded for a fresh order.
Key Takeaways
- Two Independent Rights: The right to a written reply and the right to a personal hearing are two separate, mandatory, and independent safeguards under GST law.
- ‘NA’ in Hearing Column is Fatal: An SCN that marks the personal hearing as ‘NA’ is procedurally defective and denies the taxpayer a statutory right from the outset.
- No Automatic Waiver: A taxpayer’s failure to file a written reply does not automatically waive their right to a personal hearing, especially when an adverse order is contemplated (as per Section 75(4)).
- Breach of Natural Justice: An order passed without offering a personal hearing is a violation of the mandatory procedure and the principles of natural justice, and it is liable to be set aside.
HIGH COURT OF ALLAHABAD
A to Z Car Solutions
v.
State of U.P.
Shekhar B. Saraf and Praveen Kumar Giri, JJ.
WRIT TAX No. 3851 of 2025
SEPTEMBER 11, 2025
Gauransh Mishra and Pranjal Shukla for the Petitioner.
ORDER
1. Having heard Mr. Pranjal Shukla, learned counsel for the petitioner and learned Standing Counsel for the revenue, we find that as per Section 75 (4) of the U.P. G.S.T. Act, 2017 (hereinafter referred to as ‘the Act’) opportunity of personal hearing has to be granted before any adverse decision is taken against any person, here a registered person/petitioner.
2. Undeniably, the notice issued to the petitioner under Section 73(1) of the Act, and thereafter, reminder notice dated January 30, 2025 was issued which did intend to call for a reply from the petitioner but did not propose to grant personal hearing as the abbreviation “NA” was specified against the column “date of personal hearing”. In that against the columns to specify the date of personal hearing, time of personal hearing and venue for personal hearing, the abbreviation “NA” i.e. ‘Not Applicable’ was recorded.
3. In view of the above position admitted on the record, the only conclusion possible to be drawn is that the petitioner was never afforded any opportunity of personal hearing.
4. Thus, upon service of notice, the petitioner had been called to file its reply only. Consequently, non-compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate at oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped.
5. In other words, the rules of natural justice as are ingrained in the statute prescribe dual requirement. First with respect to submission of written reply and the second with respect to oral hearing. Failure to avail one opportunity may not lead to denial of the other. The two tests have to be satisfied independently.
6. On merits, learned counsel for the petitioner further states that detailed reply was not required. The discrepancies in the returns as noticed by the adjudicating authority would have been clarified if opportunity of personal hearing had been granted.
7. In view of the above noted facts and reasons, we find no useful purpose may be served in keeping this petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy. The order impugned has been passed contrary to the mandatory procedure. The deficiency of procedure is self apparent and critical to the out-come of the proceedings.
8. Accordingly, the impugned order dated February 6, 2025 is set aside. Matter is remitted to the respondent No.2 to pass a fresh order. In that regard the petitioner may file its final reply to the show cause notice within two weeks from date. Thereafter, the petitioner may appear before the assessing authority on the date fixed by the assessing authority, whereafter the assessing authority may pass appropriate reasoned order.
9. Accordingly, the writ petition is allowed.