Burden Of Court Increasing Over Violations Of Natural Justice: Allahabad HC Imposes 20K Cost On GST Official For Not Following Mandatory Provision
The Allahabad High Court has imposed a cost of Rs. 20,000 on Joint Commissioner SGST, Corporate Circle-1, Ghaziabad who had issued a show cause notice without specifying the date and time for personal hearing and had passed an order under Section 74 of the Goods and Services Tax Act, 2017 creating a demand of more than Rs. 5 crore ignoring the specific request for personal hearing made by...
The Allahabad High Court has imposed a cost of Rs. 20,000 on Joint Commissioner SGST, Corporate Circle-1, Ghaziabad who had issued a show cause notice without specifying the date and time for personal hearing and had passed an order under Section 74 of the Goods and Services Tax Act, 2017 creating a demand of more than Rs. 5 crore ignoring the specific request for personal hearing made by the assesee.
Section 75(4) of the GST Act provides that when requested in writing, the assesee must be given an opportunity of personal hearing where assesee is chargeable to tax/ penalty or where any adverse action is contemplated against him.
The bench of Chief Justice Arun Bhansali and Justice Kshitij Shailendra held
“Innumerable cases have come before this Court where show cause notices have been issued and ex-parte assessments made after the cancellation of the GST registration of the firm, based on uploading of notices on the portal, without ensuring personal service of the notices.”
“Such conduct of the officers in dealing with matters, besides resulting in huge loss of time on the part of the State Government, the same unnecessarily increases burden of this Court wherein numerous petitions every day, underlying violation of principles of natural justice, are being filed and as violations are so glaring, this Court is left with no option but to allow the petitions and remand back the matters to the authorities.”
Petitioner was issued a show cause notice under Section 74 regarding wrong classification of goods by it. In the show cause notice, in column for date and time of personal hearing 'NA' was mentioned. In reply, petitioner denied all charges and requested for a personal hearing. However, order was passed without giving an opportunity of hearing.
Counsel for petitioner challenged the order under Section 74 of the Act on grounds that it was mandatory for the authority to give an opportunity of personal hearing to the petitioner under Section 75(4), especially when the request had been made in writing for the same.
It was argued that the order was in violation of the Circular dated 13.06.2024 issued by the Additional Commissioner Law, Commercial Tax, U.P. which was issued pursuant to the directions of the High Court in Laskin Engineering Pvt. Ltd. Vs. State of U.P. and Another regarding opportunity of personal hearing.
The Court observed that the Standing Counsel for the Department produced department's instructions where no justification had been given for not following the mandatory provision of the Act.
In Laskin Engineering Pvt. Ltd. Vs. State of U.P. and Another, the Court had held that the petitioner had been denied opportunity of personal hearing as per Section 75(4) of the Act. Holding that mandatory provision was not being followed by the Authority, the Court took note of the Office Memo No. 1406 dated 12.11.2024 issued by the Commissioner, Commercial Tax, Uttar Pradesh which provides that in the column for date and time of personal hearing, the same have to be mentioned instead of NA; the date of show cause notice and the date of submitting reply have to prior to the date of personal hearing; and order has to be passed on the date of personal hearing.
Accordingly, the Court in Laskin Engineering Pvt. Ltd., holding that there was gross violation of principles of natural justice and that the petitioner could not be relegated to alternate remedy, the Court directed the Commissioner, Commercial Tax, Uttar Pradesh to undertake remedial measures to avoid violation of principles of natural justice. while parting, the Court also cautioned of heavy penalty for future violations.
Thereafter, an office memo was issued to all Additional Commissioners, Commercial Taxes directing them to strictly follow the mandatory provisions of Section 75(4) of the Act.
Observing that numerous petitions for violation of principles of natural justice were being filed every day, the bench headed by Chief Justice Bhansali held that the authorities were mechanically passing orders without adverting to material available to them electronically (since all the data regarding assesses was available online).
The Court held that the authorities had not granted opportunity of personal hearing despite petitioner's request in writing which was violative of principles of natural justice. Accordingly, the court set aside the order under Section 74 with a cost of Rs. 20,000 paybale by the Joint Commissioner SGST, Corporate Circle-1, Ghaziabad who had issued the show cause notice as well as the impugned order.
Further, the Court directed that proper training must be given of officers as they are not following the directions and the circulars issued to them. It directed that disciplinary action as contemplated in Laskin Engineering Pvt. Ltd. must be taken against the erring officials otherwise the State will suffer.
Case Title: Merino Industries Ltd. v. State of Uttar Pradesh and another [WRIT TAX No. - 1406 of 2025]