GST Demand of Rs. 6.75 Lakh Quashed for Violation of Principles of Natural Justice

The writ petition has been preferred against the order holding liability for tax interest and penalty totalling Rs. 6,75,552 under Section 73(9) of the GST Act for the financial year 2018-19. The petitioner has also prayed for setting aside the show cause notice dated 22.12.2023 on the ground that the adjudication proceedings were fundamentally flawed and in violation of law. It was contended that no date, time or place for a personal hearing was stipulated in the show cause notice, and the columns concerned were just marked as “N.A.”

The petitioner relied on a coordinate Bench decision in Mahaveer Trading Company v. Deputy Commissioner, State Tax, wherein similar adjudication orders were quashed for denying personal hearing and violating natural justice. It was argued that despite replies being filed, no opportunity of oral hearing was ever granted before passing the adverse order.

Issue Raised: Whether an adjudication order passed under Section 73 of the GST Act could be sustained when the show cause notice itself did not state the date and time of personal hearing and no such hearing was granted, thus violating the principles of natural justice.

Court Held: The Court held that before passing any adverse order in adjudication proceedings, the authority is duty-bound to grant an opportunity of personal hearing, unless such right is expressly waived or not availed despite due notice. Denial of such opportunity renders the adjudication legally unsustainable.

The HC further held that since the show cause notice that had been given was also invalid, the later proceedings had been vitiated as well. As such, the ex-parte order of the 26.04.2024 was quashed and set aside, with the liberty to issue a fresh show cause notice to proceed further as per law. Therefore, the writ petition was disposed of.

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