High Court warns of Disciplinary Action and Heavy Penalty on GST Officers for rejecting Hearing Opportunity

The Allahabad High Court has warned the Commissioner of Commercial Tax in Uttar Pradesh that Goods and Services Tax (GST) officials who denied the taxpayer the opportunity to be heard will face disciplinary action and hefty penalties. The court emphasized the infringement of the Natural Justice Principles.

Challenge has been raised to the order dated 19.08.2021 passed by the Deputy Commissioner, Commercial Tax Department, Sikandrabad, Bulandshahar, under Section 74(9) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘Act’).

At the very outset, learned Additional Chief Standing Counsel has raised a preliminary objection as to the availability of remedy of appeal under Section 107 of the Act.

That objection has been met by the learned counsel appearing for the petitioner on the strength of (violation of) Section 75(4) of the Act.

It is basic to procedural law under taxing statutes that the opportunity for a personal hearing must be provided to an assessee before any assessment/adjudication order is passed against him. Thus, we find it strange and wholly unacceptable merely because the substantive law has changed, the revenue authorities have changed their approach and are failing to observe the mandatory requirement of procedural law. They have thus denied the opportunity of hearing to the assessee.

It transpires from the record, that neither the adjudicating authority issued any further notice to the petitioner to show cause or to participate in the oral hearing, nor did he grant any opportunity of personal hearing to the petitioner.

On query made, the learned Additional Chief Standing Counsel fairly submits, in light of similar occurrences, noticed in other litigation, he had apprised the Commissioner, Commercial Tax. In turn, the Commissioner, Commercial Tax, Uttar Pradesh, has issued Office Memo No. 1406 dated 12.11.2024. It reads as below:

1. The lack of set dates and times for personal hearings.

2. Hearing dates were incorrectly scheduled in connection to reply deadlines for Show Cause Notices (SCN).

3. Non-conformity between order and personal hearing dates.

In view of the facts noted above, before any adverse order is passed in an adjudication proceeding, a personal hearing must be offered to the noticee. If the noticee chooses to waive that right, the occasion may arise with the adjudicating authority, (in those facts), to proceed to deal with the case on merits, ex-parte. Also, another situation may exist where even after granting such an opportunity of personal hearing, the noticee fails to avail the same. Leaving such situations apart, we cannot allow a practice to arise or exist where the opportunity for a personal hearing may be denied to a person facing adjudication proceedings.

Thus, the impugned order cannot be sustained in the eyes of the law. It has been passed in gross violation of fundamental principles of natural justice. The self-imposed bar of an alternative remedy cannot be applied to such facts. If applied, it would be of no real use. In fact, it would be counterproductive to the interest of justice. Here, it may be noted, that the appeal authority does not have the authority to remand the proceedings.

Accordingly, the writ petition is disposed of with the following observations/directions:

(i) The impugned order dated 19.08.2021 passed by the respondent no. 2-Deputy Commissioner, Commercial Tax Department, Sikandrabad, Bulandshahar, is hereby set aside.

(ii) The matter is remitted to respondent no.2-Deputy Commissioner, Commercial Tax Department, Sikandrabad, Bulandshahar to pass a fresh order, in accordance with law, after affording the due opportunity of hearing to the petitioner.

While we proposed to impose heavy costs for the conduct offered by respondent No. 2, we have been assured by the learned Additional Chief Standing Counsel, that such occurrences will not be repeated in future.

Accordingly, we direct the Commissioner, Commercial Tax, Uttar Pradesh to undertake remedial measures including providing for disciplinary proceedings against erring officials, where fundamental principles of natural justice may be violated by the adjudicating authorities, without justifiable reason.

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