The Allahabad High Court has set aside a GST demand order issued under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017, holding that the GST Assessment Order is invalid where notice, reply, hearing dates were fixed on the same day.

The bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary has observed that the tax department violated the principles of natural justice by failing to provide a meaningful opportunity of personal hearing before passing the adjudication order. The Court emphasized that personal hearing is a mandatory requirement whenever an adverse decision is contemplated against a taxpayer. 

The petitioner contended that the adjudication proceedings suffered from a fundamental procedural defect because the department fixed the same date for filing a reply and for personal hearing. According to the petitioner, this deprived it of a genuine opportunity to present its case before the authority. Reliance was placed on an earlier Division Bench judgment of the Allahabad High Court in Mahaveer Trading Company v. Deputy Commissioner, State Tax, which had addressed similar procedural lapses by GST authorities. 

During the hearing, the State’s counsel, based on departmental instructions, fairly admitted that the date fixed for filing the reply and the date of personal hearing were indeed the same. 

The Bench extensively referred to its earlier decision in Mahaveer Trading Company. In that case, the Court had underscored that the opportunity of personal hearing is an essential component of procedural fairness in tax adjudication proceedings. 

The Court reiterated that Section 75(4) of the GST Act expressly provides that an opportunity of hearing shall be granted whenever a written request is received from the taxpayer or where an adverse decision is contemplated against such person. The Bench observed that compliance with this statutory mandate cannot be treated as a mere formality. 

Referring to the earlier judgment, the Court noted that revenue authorities have increasingly failed to observe mandatory procedural safeguards despite clear statutory requirements. It observed that before any adverse adjudication order is passed, the taxpayer must be afforded a real and effective opportunity to present its case. 

The Court also referred to an Office Memorandum issued by the Commissioner, Commercial Tax, Uttar Pradesh, on November 12, 2024, addressing recurring procedural irregularities in GST adjudication proceedings. The memorandum highlighted several defects noticed in departmental practice, including instances where:

• No date or time of personal hearing was specified;
• The hearing date was fixed before the deadline for filing replies;
• The hearing date and reply date were fixed on the same day; and
• Orders were passed without maintaining a proper sequence between filing of replies, hearing, and adjudication. 

The circular specifically directed field officers to discontinue such practices and ensure that the date for submission of replies precedes the date of personal hearing. 

The Bench reaffirmed that denial of personal hearing in adjudication proceedings cannot be tolerated except in situations where the taxpayer waives the right or fails to avail the opportunity despite it being properly granted. The Court observed that a practice cannot be allowed to develop whereby taxpayers facing adverse proceedings are deprived of their statutory right to be heard. 

Applying the principles laid down in Mahaveer Trading Company, the Court held that the procedural defect in the present case went to the root of the matter. Since the taxpayer had not been provided an effective opportunity of hearing, the impugned order could not be sustained in law. 

The Allahabad High Court quashed the GST order dated December 1, 2023, and allowed the writ petition. The matter was remanded to the assessing authority with a direction to pass a fresh order after providing the petitioner with an adequate opportunity of hearing in accordance with law.

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