Demand Order Under Section 73 Set Aside and Remanded Due to Denial of Personal Hearing;

Demand Order Under Section 73 Set Aside and Remanded Due to Denial of Personal Hearing; Appellate Order Also Faulted for Not Deciding on Merits.

Issue:

Whether an order under section 73 of the CGST/UPGST Act, 2017, can be sustained if passed without granting a personal hearing, even when specifically requested by the assessee.
Whether an Appellate Authority can dismiss an appeal solely on the ground of the appellant’s non-appearance, without adjudicating the appeal on its merits as mandated by law.

Facts:

A show cause notice was issued to the assessee, and in reply, the assessee specifically sought a personal hearing. However, an order was subsequently passed under section 73 without granting this requested opportunity. Aggrieved, the assessee filed an appeal, but the appeal was dismissed by the Appellate Authority. The Appellate Authority’s dismissal was based on the reasoning that the assessee failed to produce any evidence and did not appear before it. The assessee contended that even if they did not appear, it was incumbent upon the Appellate Authority to decide the appeal on its merits.

Decision:

In favor of the assessee (Matter remanded): The court held that, in terms of section 75(4) of the CGST Act, it is incumbent upon the tax authorities to grant an opportunity of hearing, even if the same is not specifically asked for, in cases where an adverse decision is contemplated. In this case, the demand order was passed without providing any opportunity of hearing despite the assessee having sought such an opportunity. As such, the order passed under section 73 was in violation of the principles of natural justice.

Furthermore, the court found that the appeal was rejected without dealing with the merits and records, solely on the ground that the assessee did not appear. This manner of adjudication of the appeal could not be termed as justified, in view of the clear mandate under section 107(12) of the CGST Act, which requires the Appellate Authority to pass a speaking order, stating the points for determination, the decision thereon, and the reasons for such decision.

Accordingly, both the impugned orders (the original demand order and the appellate order) were set aside, and the matter was remanded back to the Assessing Authority to pass fresh orders after affording a proper opportunity of hearing to the assessee.

Key Takeaways:

Mandatory Personal Hearing (Section 75(4)): Section 75(4) of the CGST Act makes it mandatory to grant an opportunity of hearing when a written request is received from the person chargeable with tax or penalty, or when any adverse decision is contemplated against such person.¹ Passing an order without such a hearing, especially when requested, is a direct violation of natural justice principles.
Duty to Adjudicate on Merits (Section 107(12)): The Appellate Authority, under Section 107(12) of the CGST Act, has a statutory duty to pass a “speaking order” that addresses the points for determination, the decision, and the reasons for that decision. Dismissing an appeal merely due to the appellant’s non-appearance, without delving into the merits of the case as presented in the appeal memo or available records, is a procedural lapse that warrants setting aside the appellate order.
Consequence of Natural Justice Violation: Violations of natural justice, such as the denial of a fair hearing, are fundamental flaws that can lead to the quashing of assessment and appellate orders, even if the underlying tax demand has some basis.
Remand for Fresh Adjudication: When such procedural infirmities are found at multiple levels (adjudicating and appellate), courts typically remand the matter back to the original authority for a fresh consideration, ensuring that due process is followed and a fair opportunity is provided to the assessee.

HIGH COURT OF ALLAHABAD

Amar Agencies

State of U.P. ^*

Pankaj Bhatia, J.

WRIT TAX No. 414 of 2025

MAY 6, 2025

Ashish Chaturvedi and Pratichi Chaturvedifor the Petitioner.

ORDER

1. Heard learned counsel for the petitioner and learned Standing Counsel for the State.

2. Present petition has been filed challenging the order dated 28.12.2023 passed against the petitioner under Section 73 of GST Act as well as the order dated 23.12.2024 passed by the appellate authority whereby the appeal of the petitioner was dismissed.

3. The facts, in brief, are that the petitioner was served with a show cause notice. In reply, the petitioner had sought for personal hearing, however, without granting the personal hearing, the order came to be passed under Section 73 of GST Act. Aggrieved against the said order, the petitioner preferred an appeal. The appellate order records that on three occasions, learned counsel for the appellant had appeared, however, thereafter, he did not appear despite several dates being fixed, as such, the appeal was decided holding that the appellant had failed to produce any evidence either before the adjudicating authority or before the appellant authority and also did not appear before the appellate authority, as such, the order dated 28.12.2023 required no interference.

4. In the light of the said argument, learned counsel for the petitioner argues that despite seeking an opportunity of hearing, the petitioner was not granted the haring which is contrary to the mandate of Section 75(4) of GST Act. He also places reliance on the Division Bench judgment of this Court in the case of Merino Industries Ltd. v. State of Uttar Pradesh

“12. The present case provides a glaring example of such conduct on the part of the officers of the State wherein besides denying opportunity of personal hearing in the show cause notice by indicating ‘NA’ in the column pertaining to date of personal hearing, despite specific prayer made for providing opportunity of hearing in reply, the order impugned has been passed without affording any opportunity of hearing.”

5. With regard to the appellate order, contention of learned counsel for the petitioner is that even if the appellant had not appeared, it was incumbent upon the appellate authority to have decided the appeal on merits in terms of the mandate of Section 107(12) of the GST Act, which has not been done. Section 107(12) is quoted herein below:

“107. Appeals to Appellate Authority.

……

(12) The order of the Appellate Authority disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for such decision.”

6. In terms of the mandate of Section 75(4) of GST Act, it is incumbent to grant an opportunity of hearing even if the same is not asked for, as such, the order under Section 73 of GST Act is in violation of principles of natural justice as well as against the mandate of Section 75(4) of GST Act. The appellate order, although, records the submission made in the memo of appeal, however, does not deal the same on merits and record that the appellant has failed to adduce any evidence. The said manner of adjudication cannot be termed as justified in view of the mandate of Section 107(12) of GST Act. Thus, finding the impugned orders dated 28.12.2023 & 23.12.2024 to be short of requirements of the mandatory provisions, the same cannot be sustained and are quashed.

7. Matter is remanded to the assessing authority to pass fresh order in accordance with law after affording an opportunity of hearing.

8. Present petition stands allowed in above terms.