Section 75(4) GST Act | If Adverse Decision Is Contemplated, Opportunity Of Hearing Should Be Provided Even When Not Requested: Madhya Pradesh HC

The Madhya Pradesh High Court held that, under Section 75(4) of GST Act, an opportunity of hearing is required to be given, even in those cases where no such request is made but adverse decision is contemplated.

The case concerned M/S Technosys Security System Private Limited, a company that was issued a show-cause notice by the Deputy Commissioner of State Tax (Second Respondent). Without granting the company an opportunity for a hearing, the authorities initiated proceedings against M/S Technosys Security System Private Limited.

The Court quashed the proceedings against the company, citing a violation of the principles of natural justice.

The Bench comprising Justice Sujoy Paul and Justice Binod Kumar Dwivedi observed, “Although, in the first portion of the statute, i.e. sub-section 4 of Section 75 of the Act, the statute talks about a specific request, the portion after the word ‘or’ makes it clear like cloudless sky that opportunity of hearing is required to be given, even in those cases where no such request is made but adverse decision is contemplated against such person."

Advocate Jatin Harjai appeared for the Petitioner and Government Advocate Ayush Bajpai appeared for the Respondents.

The Petitioner filed a Writ Petition before the High Court challenging the order passed by the Deputy Commissioner of State Tax (Second Respondent), whereby the amount of tax, interest and penalty has been quantified as Rs.9.76 crores. The Petitioner contended that the opportunity of hearing was not provided to him before passing the impugned order.

The Court noted that the opportunity of hearing must be granted in two situations under Sub Section 4 of Section 75 of the Goods and Services Tax Act:

(a) where a request in specific is received in writing from the person chargeable;

(b) where any adverse decision is contemplated against such person.

Furthermore, the Bench observed that the language of sub-section 4 of Section 75 of the Act is plain and unambiguous, and it leaves no room for doubt that the lawmakers use the word "or" for a specific purpose. The statute talks about a specific request, but the portion after the word "or" makes it clear that an opportunity for a hearing is required to be given, even in those cases where no such request is made but an adverse decision is contemplated against such person.

Additionally, the Court observed that the expression "opportunity of hearing" is not fulfilled if only a reply to a show cause notice is received. The Court noted that the lawmakers while prescribing the statutory form, visualized different stages for "personal hearing". The one stage is when the reply is submitted and the other stage is the date, venue and time of the personal hearing. The Court noted that the opportunity of hearing includes the opportunity for a personal hearing.

The Court noted that, in the case, the Petitioners were not given an opportunity for a personal hearing, even though an adverse decision was contemplated against them. This was a violation of the principles of natural justice and the statutory requirement of subsection 4 of Section 75 of the GST Act. The decision-making process adopted by the Respondents is therefore vitiated and must be set aside.

Accordingly, the Court allowed the Petition and set aside the proceedings which were initiated after show cause notice.

Cause Title: M/S Technosys Security System Private Limited v Commissioner, Commercial Taxes

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