Demand Order cannot be passed without providing hearing opportunity

Last updated: 24 August 2021

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Quick Summary

The Andhra Pradesh High Court ruled that a demand order cannot be issued without first offering the affected party a hearing. This decision, based on Section 75(4) of the CGST Act, emphasizes the mandatory nature of providing an opportunity to be heard, especially when adverse actions like confirming a tax demand are contemplated. The court set aside the original order and remanded the case, stressing the importance of natural justice principles.

Court :
Andhra Pradesh High Court

Brief :
In Ocean Sparkle Ltd. v. Assistant Commissioner (ST) [ WRIT PETITION NO. 9162 OF 2021 dated April 28, 2021] Ocean Sparkle Ltd. ('the Appellant') has filed the current writ petition challenging the Assessment Order bearing Ref. No. ZD370321001535W dated March 17, 2021 on the grounds of non-compliance with provisions laid in Section 75(4) of the Central Goods and Services Act, 2017 ('CGST Act').

Citation :
WRIT PETITION NO. 9162 OF 2021 dated April 28, 2021

In Ocean Sparkle Ltd. v. Assistant Commissioner (ST) [WRIT PETITION NO. 9162 OF 2021 dated April 28, 2021] Ocean Sparkle Ltd. ('the Appellant') has filed the current writ petition challenging the Assessment Order bearing Ref. No. ZD370321001535W dated March 17, 2021 on the grounds of non-compliance with provisions laid in Section 75(4) of the Central Goods and Services Act, 2017 ('CGST Act').

The Hon’ble High Court of Andhra Pradesh by referring to Chapter XV of the Act dealing with 'Demands and Recovery' noted the relevance of Section 75(4) of the CGST Act which provides that when a person is chargeable with tax and penalty or in case any adverse action is contemplated against such person under this Act, an opportunity of hearing must be provided to him on his request. Noted such opportunity of hearing is indispensable and is to be always followed scrupulously.

Noted that when the Assessment Authority ('AA') initiated an adverse action against the Appellant on the ground of the Appellant failing to file objections against the Show Cause Notice ('SCN'), the AA confirmed the demand. Doing so, the AA should have followed the mandatory requirements mentioned under Section 75(4) of the CGST Act scrupulously.

Held that the Impugned order be set aside not only on the ground of deviation from the mandatory provisions of Section 75(4) but also on the ground of violation of principles of natural justice.

The matter thereby was remanded back to the AA for passing appropriate orders after giving the Appellant an opportunity of hearing.

FAQ :

The main point is that a demand order under the CGST Act cannot be passed without giving the person concerned an opportunity to be heard, as required by Section 75(4).

Section 75(4) of the Central Goods and Services Tax (CGST) Act, 2017, is relevant, as it mandates providing a hearing opportunity.

In this context, the principle of natural justice violated was the right to a fair hearing before an adverse decision (like a demand order) is made.

The original assessment order was set aside by the High Court because it was passed in violation of Section 75(4) and principles of natural justice.

The case was remanded back to the Assessment Authority to pass fresh orders after providing Ocean Sparkle Ltd. with an opportunity of hearing.