‘Opportunity of hearing’ includes the opportunity of ‘personal hearing’ [Read Order]

The Madhya Pradesh High Court in the matter of M/S TECHNOSYS SECURITY SYSTEM PRIVATE LIMITED Vs. COMMISSIONER OF COMMERCIAL TAXES has held that the ‘Opportunity of hearing’ includes the opportunity of ‘personal hearing’.

The Relevant Text of the Judgment is as follows:

This common order will decide both the writ petitions wherein the petitioners have called in question the show cause notices and the impugned orders whereby the tax interest and penalty have been imposed on the petitioners.

To elaborate, the facts are taken from W.P. No.13618 of 2023. The scrutiny was concluded on 6.5.2022. A show cause notice dated 7.10.2022 (Annexure P-4) was issued, wherein the amount determined was Rs.7.37 crores. The petitioner filed a reply to the show cause notice on 21.1.2023. In the final order dated 17.2.2023 (Annexure P-6), the amount of tax, interest and penalty is quantified as Rs.9.76 crores. It is pointed out that in the other connected matter, the dates are almost the same. However, the amount mentioned in the show cause notice is Rs.1.18 crores, whereas the final tax, interest and penalty imposed is to the tune of Rs.14.56 crores.

We have heard learned counsel for the parties at length and perused the relevant documents.

A plain reading of sub-section 4 of Section 75 of the Act makes it crystal clear that “opportunity of hearing” must be granted in two situations viz (a) where a request in specific is received in writing from the person chargeable; (b) where any adverse decision is contemplated against such person.

The language employed in sub-section 4 of Section 75 of the Act leaves no room for any doubt that the word ‘or’ is used by the law makers for a specific purpose. Although, in the first portion of the statute, i.e. sub-section 4 of Section 75 of the Act, the statute talks about a specific request, the portion after the word ‘or’ makes it clear like a cloudless sky that opportunity of hearing is required to be given, even in those cases where no such request is made but the adverse decision is contemplated against such person. We find support in our view by the Division Bench judgment of Allahabad High Court in M/s. BL Pahariya Medical Store (supra).

The ancillary question springs up from the argument of a learned Government Advocate for the State whether the expression ‘opportunity of hearing’ is fulfilled if a reply to show cause notice is received. We find substance in the arguments of learned counsel for the petitioners that even lawmakers while prescribing the statutory form have visualized different stages for the purpose of ‘personal hearing’. The one stage is when the reply is submitted and the other stage is the date, venue and time of the personal hearing. Thus, we are unable to persuade ourselves with the line of argument of learned Government Advocate that ‘opportunity of hearing’ does not include the opportunity of ‘personal hearing’.

In the instant case whether or not the petitioners have specifically asked for a personal hearing, the fact remains that the adverse decision was contemplated against the petitioners. In that event, it was obligatory and mandatory on the part of respondents to provide the petitioners opportunity of a personal hearing. Admittedly, no opportunity for personal hearing has been provided in both matters. Resultantly, the decision-making process adopted by the respondents is vitiated and runs contrary to the principles of natural justice and statutory requirement of sub-section 4 of Section 75 of GST Act. (See Graziano Trasmissioni India Pvt. Ltd. (supra).

As a result, the impugned proceedings after the stage of reply of show cause notices, in both cases are set-aside. The respondents shall provide the opportunity of hearing to the petitioners in both cases by some other officer than the officer who has issued the show cause notice (c) Judgment of Madhya Pradesh High Court in Ultratech Cement Ltd. (supra).

Both the writ petitions are disposed of.

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