Department cannot pass adverse orders without reasonable opportunity of hearing

The Delhi High Court has ruled that tax authorities must provide a reasonable opportunity for taxpayers to be heard before passing any adverse orders. This decision came after several petitions challenged orders issued under Section 73 of the CGST Act, which were found to be unreasoned and passed without properly considering taxpayer responses, often issued just before the limitation period expired. The court emphasised the fundamental right to a hearing, reinforcing that such orders cannot be made without due process.

The Hon'ble Delhi High Court passed a common order in the case of Mohinder Kumar v. Pr. Commissioner of Delhi GST and connected matters[W.P. (C) 10869/2024 & Connected petitions dated August 30, 2024] held that an Adjudicating Authority shall not pass any adverse order against any of the Petitioners without affording them a reasonable opportunity to be heard.

Facts:

The common issue that arose in these batch of petitions was that the orders passed under Section 73 of the Central Goods & Services Tax Act, 2017 ("the CGST Act") which were impugned in these petitions were unreasoned and were passed without considering the response submitted by the Petitioners to their respective Show Cause Notices ("SCNs"). Further, these impugned orders were issued during the last three days prior to the expiry of period of limitation for passing the said orders for the financial years 2017-18 and 2018-19 and were called upon to furnish the details of orders that were passed during the last few days of the extended period of limitation.

One of the common features of the impugned orders is that they merely reproduce the tabular statement of the demand proposed in the respective SCNs and affirm the same by rejecting the response of the taxpayer as unsatisfactory.

Hence, the Petitioners filed a writ petition before the Delhi High Court.

Issue:

Whether the Department can pass adverse orders without reasonable opportunity of hearing?

Held:

The Hon'ble Delhi High Court in W.P. (C) 10869/2024 and connected petitions held as under:

• Held that, the adjudicating authority shall not pass any adverse order against any of the Petitioners without affording them a reasonable opportunity to be heard. Further, all rights and contentions of the Petitioners are reserved, and the disposal of the present petitions would not preclude them from raising such contentions as advised including those that may have been raised in the present petitions.

Our Comments:

The Hon'ble Supreme Court in the case of M/s Daffofills Pharmaceuticals Ltd. and Anr. v. State of Uttar Pradesh &Anr. [Civil Appeal No. 9417 of 2019 dated December 13, 2019] held that no one can be inflicted with an adverse order, without being afforded a minimum opportunity of hearing and quashing an order passed by Uttar Pradesh Government directing its Medical and Health Department to stop local purchase.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED