Opportunity of PH is must even if taxpayers has not filed reply of SCN

The Hon'ble Allahabad High Court in the case of A To Z Car Solutions v. State of U.P. & Ors. [Writ Tax No. - 3851 of 2025, order dated September 11, 2025] held that the assessment order under Section 73 of the UPGST Act is unsustainable where the assessee is denied the mandatory right of oral hearing, irrespective of compliance to the opportunity to file written reply.​

Facts:

A To Z Car Solutions ("the Petitioner") is a registered taxpayer under the UPGST Act ("the Act") and was served with a notice under Section 73(1) followed by a reminder seeking written reply concerning discrepancies in its returns.​

The State of U.P. & 2 Others ("the Respondent") initiated assessment proceedings, with notices that called only for a written reply and explicitly marked all columns for personal hearing as "NA" (Not Applicable), thus not granting any oral hearing opportunity to the Petitioner.​

The Petitioner contended that not providing a personal hearing contravened Section 75(4) of the Act and the principles of natural justice incorporated therein, which demand a dual opportunity, i.e written reply and oral hearing. The Petitioner said it could have clarified the discrepancies, had a personal hearing been granted.​

The Respondent contended that non-compliance with the show cause notice (failure to file written reply) closed only that opportunity, and did not prejudice the Petitioner because statutory procedures and notices had been issued as required.​

Aggrieved, the Petitioner approached the Allahabad High Court seeking quashing of the assessment order and remand for fresh proceedings in accordance with law.​

Issue:

Whether an assessment order under Section 73 of the Act can be sustained when the assessee has not been granted a personal hearing, even if opportunity to file written reply was afforded, in light of Section 75(4) and principles of natural justice?​

Held:

The Hon'ble Allahabad High Court in Writ Tax No. - 3851 of 2025 held as under:

· Observed that, Section 75(4) of the Act mandatorily requires a personal hearing before any adverse decision is passed against a registered person, and mere closure of opportunity to file a written reply does not divest the assessee of the right to oral hearing.​

· Noted that, the natural justice principles also provide two independent requirements-one for submission of written reply, and another for oral hearing, each to be satisfied separately; failure to exercise one does not extinguish the other.​

· Noted that, even if an assessee fails to file written reply, they retain the right to establish their case at the oral hearing stage; the law cannot defeat this right by procedural omission.​

· Held that, the impugned assessment order is contrary to the mandatory procedure of Section 75(4), violates principles of natural justice, and is thus unsustainable, requiring remand for fresh decision.​

· Directed the Respondents to permit the Petitioner to file its final reply within two weeks and provide a date for personal hearing before deciding the case afresh and set aside impugned order and allowed writ petition.​

Our Comments:

In the case of Ms Atlas Cycles Haryana Ltd v. State of U.P. and Another [2024:AHC:23775-DB], it was held that, "Non compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate in the oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped."

Further the settled mandate of opportunity for personal hearing before any adverse order is passed is upheld by various courts. A coordinate bench of this Court in Bharat Mint & Allied Chemicals Vs. Commissioner Commerical Tax & 2 Ors., [(2022) 48 VLJ 325], had asserted that, the Assessing Authority was bound to afford opportunity of personal hearing to the petitioner before he may have passed an adverse assessment order.

Further the Hon'ble Madras High Court in case of Tvl. Sri Vinayaga Tiles & Granites vs. Deputy State Tax Officer [W.P. No. 3588 of 2025 order dated February 4, 2025] allowed the writ petition and set aside the adjudication order, holding that fixing a personal hearing prior to the filing of reply amounts to procedural impropriety and violates Section 75(4) of the TNGST/CGST Act.

Relevant Provisions:

Section 73 of the CGST Act, 2017

Section 73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts:

"(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order…"

Section 74 of the CGST Act, 2017

Section 74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of facts:

"(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.

(2) The proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub-section (10) for issuance of order…"

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED