Gujarat High Court Sets Aside GST Order for Denying Personal Hearing

The Gujarat High Court has ruled in favor of taxpayer Komal Jayeshbhai Hemavat, holding that tax authorities cannot pass an adverse GST order without providing the taxpayer a proper opportunity of personal hearing, even if the taxpayer had mentioned that no personal hearing was required.

The case was registered after GST authorities conducted a search at the petitioner’s premises and seized the business records. Later, a show-cause notice was issued on alleged tax liability under GST law. The petitioner gave a written reply to the notice but the tax department passed an order under Section 74 of the GST Act on 30 December 2023 without holding any personal hearing.

The petitioner challenged the order before the High Court on the ground that the action was in violation of Section 75(4) of the GST Act and violated the principles of natural justice as there was no hearing before the adverse order was passed.

During the hearing, the State justified its action on the ground that while filing the reply in Form DRC-06, the petitioner had opted for the option “No” to the request for personal hearing. Therefore, according to the department, there was no need to grant a hearing.

The High Court rejected this argument. The Court observed that a taxpayer’s selection of “No” in the form cannot override the mandatory requirement of Section 75(4) of the GST Act. The judges emphasized that the law requires the authority to provide an opportunity of hearing before passing an order that may adversely affect a taxpayer.

Relying on its earlier decisions, the Court held that the right to be heard is a fundamental principle of natural justice. A fair hearing includes proper notice and a genuine opportunity to present one’s case before any adverse decision is taken.

The Court further observed that tax authorities are expected to provide three opportunities of personal hearing before passing such orders. Since no hearing was granted in the present case, the impugned order was held to be contrary to the statutory provisions and principles of natural justice.

Accordingly, the High Court quashed the GST order and remanded the matter back to the tax authorities for fresh adjudication. The authorities have been directed to provide an adequate opportunity of hearing to the petitioner and pass a fresh order within 12 weeks.