GST Update No 327 on grant of personal hearing even if not requested

It is well established that before passing any adverse order against the assessee or before initiating any adjudicating proceedings, a proper and valid show cause notice and an opportunity of hearing must be served on the assessee. Although it is well known that opportunity of hearing is a vested right of the taxpayer, yet it is often observed that revenue authorities are reluctant to grant opportunity of hearing and pass the demand orders. The High Courts have to step down to provide relief to aggrieved taxpayers. Recently, one such case of same subject matter was reported before Gujarat High Court in the case of M/S GRAZIANO TRASMISSIONI INDIA PRIVATE LIMITED VS STATE OF GUJARAT. The decision imparted in this case is subject matter of discussion of our present update. The petitioner filed this petition under Article 226 of Constitution of India. It was submitted that there is gross violation of principles of natural justice. The petitioner is a unit manufacturing automobile component. The goods were exported by the petitioner outside India under LUT and without payment of GST. The returns in FORM GSTR-1, 3B and 9 were filed. It was alleged that in GSTR-1 and 9, the petitioner correctly disclosed the export turnover in the column of zero-rated supply. However, in GSTR-3B filed by petitioner for September, 17 inadvertently the value of exports were reported in exempt/NIL rated supply and not in zero rated supply. Consequently, the GST liability along with interest and penalty was intimated in DRC-01A along with the requirement of reversal as per Rule 42 and 43 of CGST Rules, 2017.The petitioner responded on 27.07.2021 to the intimation received related to scrutiny of returns. The reply was furnished on 26.08.2021 wherein explanation was provided clarifying that the amount did not pertain to exempted, NIL rated and non-taxable supply. It was submitted that this happened because of the fact that GST was introduced in 2017. The petitioner further argued that a show cause notice was issued wherein demand along with interest and penalty was proposed. The reply was filed as on 26.02.2022 along with annexures. On 25.03.2022, an order was passed by respondent and no opportunity of hearing was awarded to the aggrieved taxpayer.

The Counsel of Department argued that the online portal was chosen by petitioner and hence, the entire proceedings are proceeded in online manner. The opportunity of hearing is not granted since the same is not requested by the petitioner. The Court heard the case and referred to the provisions of Section 75 of CGST Act, 2017 wherein it is stated that an opportunity of hearing is to be provided where a request is received in writing or where any adverse decision is taken against such person. The revenue authorities failed to refer to the provisions of Section 75. Even if no request is made by party, an opportunity of personal hearing is to be granted in case of adverse decision. Since the same is missing in the present case, the case is remanded back directing the respondent to pass the order afresh by considering the submissions of the petitioner after providing opportunity of hearing to them.

The above decision is a favourable decision wherein it is delivered that proper opportunity of hearing must be provided to the assessee otherwise it amounts to violation of principles of natural justice. It is high time that revenue authorities should understand this basic principle otherwise the litigations will never reach to a conclusive end.

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GST Update No 327 on grant of personal hearing even if not requested

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