Adjudicating Authority must provide hearing opportunity before passing an adverse order

The Allahabad High Court has ruled that an Adjudicating Authority must provide an opportunity for a personal hearing before issuing any adverse order against an assessee. The court emphasised that it is mandatory for the authority to offer this hearing, and the assessee does not need to explicitly request it. Consequently, an order issued without this opportunity was set aside and the case was remanded.

The Hon'ble Allahabad High Court in B.L. Pahariya Medical Store v. State of U.P [Writ Tax No. 981 of 2023 dated August 22, 2023] set aside the demand order passed by the Adjudicating Authority and held that, the assessee is not required to request for opportunity of personal hearing, and it remained mandatory upon Adjudicating Authority to afford such opportunity before passing an adverse order.

Facts

B.L. Pahariya Medical Store ("the Petitioner") was served a Show Cause Notice on July 12, 2022 ("the SCN") by the Revenue Department ("the Respondent") seeking his reply within 15 days.

The Petitioner filed the reply to the SCN on December 30, 2022.

The Adjudicating Authority passed an order dated March 21,2022 ("the Impugned order"), whereby demand and penalty of INR 26 crores has been confirmed against the Petitioner.

The Petitioner relied upon the Judgement of Bharat Mint & Allied Chemicals v. Commissioner Commercial Tax & 2 Ors. [(2022) 48 VLJ 325] and on Section 75(4) of the Central Goods and Services Tax Act ("the CGST Act") and contended the Adjudicating

Authority was bound to afford opportunity of personal hearing to the Petitioner before he may have passed an adverse assessment order.

The Petitioner relied upon the Judgement of M/s Hitech Sweet Water Technologies Pvt. Ltd. v. State of Gujarat, [2022 UPTC (Vol. 112) 1760] wherein the Hon’ble Gujarat High Court set aside the Impugned Order on the ground that the lower authority was non-compliant of principles of natural justice in form of not giving opportunity of personal hearing.

Issue

Whether the Adjudicating Authority can pass order without offering opportunity of being heard?

Held

The Hon’ble Allahabad High Court in Writ Tax No. 981 of 2023 held as under:

• Noted that, the stand of the Petitioner may remain unclear unless minimal opportunity of hearing is first granted.
• Directed to issue a fresh SCN to the Petitioner within a period of two weeks.
• Relied upon the Judgement of Bharat Mint & Allied Chemicals v. Commissioner Commercial Tax & 2 Ors. [(2022) 48 VLJ 325] wherein the Hon’ble Allahabad High Court held that, the Adjudicating Authority was bound to afford opportunity of personal hearing to the Petitioner before he may have passed an adverse assessment order.
• Held that, a principle of law is laid down that the Petitioner is not required to request for "opportunity of personal hearing" and it remained mandatory upon Adjudicating Authority to afford such opportunity before passing an adverse order.
• Set aside the Impugned Order and remanded back the matter to Adjudicating Authority.

Our Comments:

Similarly, in the case of Mohini Traders v. State of U.P. [WRIT TAX No. 551 of 2023 dated May 3, 2023] the Allahabad High Court held that, it is mandatory to provide opportunity of personal hearing even if the assessee has opted ‘No’ on the against column description "Date of personal hearing" on the common portal.