Adverse GST orders passed without an oral hearing

Adverse GST orders passed without an oral hearing are procedurally vitiated and must be remanded.

Issue

Whether an assessment order passed under Section 73 of the CGST/UPGST Act, 2017 can be legally sustained if the underlying Show Cause Notice recorded “NA” for the personal hearing details, thereby denying the taxpayer an opportunity for an oral hearing.

Facts

The Revenue issued a Show Cause Notice (SCN) under Section 73 of the Act to the petitioner proposing a tax or Input Tax Credit (ITC) demand.
In the columns designated for the date, time, and venue of the personal hearing, the SCN explicitly recorded “NA” (Not Applicable), meaning no oral hearing was proposed or scheduled.
The petitioner did not file a detailed written reply to the SCN.
The assessing authority proceeded to pass an adverse final assessment order confirming the demand without providing any opportunity for a personal hearing.
The petitioner filed a writ petition in the High Court challenging the validity of the adverse order on the grounds of a breach of natural justice and statutory procedure.

Decision

Held, in favour of the assessee (matter remanded): The impugned assessment order is set aside, and the matter is remitted back to the tax authority for fresh adjudication.
Statutory Mandate of Oral Hearing: Section 75(4) of the Act makes it mandatory to grant a personal hearing before any adverse decision is finalized against a taxpayer.
Dual, Independent Requirements: The opportunity to file a written reply and the opportunity for an oral hearing are two distinct, independent statutory rights.
Failure to Reply Does Not Waive Hearing: A taxpayer’s failure to file a detailed written reply merely closes the written submission stage; it does not automatically strip them of their independent right to an oral hearing.
Order Vitiated: Because the record explicitly showed “NA” for the hearing details, the mandatory statutory procedure was bypassed, which completely vitiated the final order. The authority is directed to fix a fresh hearing date and allow the petitioner to file a final reply.

Key Takeaways

Personal Hearing is Mandatory for Adverse Orders: Under the GST regime, if an assessment order contemplates any tax, interest, or penalty liability against an assessee, the authority must offer a personal hearing, even if the taxpayer does not explicitly request one.
“NA” in SCNs is a Fatal Flaw: Mechanically marking personal hearing details as “Not Applicable” or leaving them blank in a Show Cause Notice is a structural defect that invalidates any consequential adverse order.
The Right to be Heard is Not Conditional: A taxpayer’s right to an oral hearing is not conditional upon them filing a prior written explanation; both safeguards must be independently provided by the Revenue to fulfill the principles of natural justice embedded in the statute.

HIGH COURT OF ALLAHABAD

Manas Traders

State of U.P.^*

Shekhar B. Saraf and ABDHESH KUMAR CHAUDHARY, JJ.

WRIT TAX No. 750 of 2026

MAY 15, 2026

Manish Kumar Shukla, learned counsel for the Petitioner. Sanjay Sarin, learned Additional Chief Standing Counsel for the Respondent.

ORDER

1. Having heard Manish Kumar Shukla, learned counsel for the petitioner and Sri Sanjay Sarin, learned Additional Chief Standing Counsel appearing on behalf of the State, 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, 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 21, 2023 is set aside. Matter is remitted to the respondent No.3 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.