M/S Hubli Electricity Supply Company LTD. Hescom vs. The Commissioner Of Commercial Taxes

This petition is filed by the petitioner seeking to quash the impugned order dated 30.12.2023 at Annexure-A passed by the 2nd respondent-Deputy Commissioner of Commercial Taxes (Audit-4), Hubballi and consequently direct responder No.2 to grant an opportunity of personal hearing to the petitioner and pass suitable orders.

It is the case of petitioner that petitioner is a registered entity. It is engaged in power transmission and utility services and distribution. It is in the distribution of power to 07 districts of Karnataka i.e., Dharwad, Haveri, Uttara Kannada, Gadag, Belagavi, Bagalkote and Vijayapura. Learned counsel for the petitioner contends that respondent No.2 has passed an order without affording an opportunity of personal hearing or otherwise. Therefore, the principles of natural justice have been violated so also the provisions of Section 75(4) of the Central Goods and Services Tax Act, 2017 (for short ‘the Act, 2017’). It is the contention of learned counsel for the petitioner that respondent No.2 issued show cause notice on NC: 2024:KHC-D:9776 DRC-01 dated 27.09.2023 under Section 73(1) of the Act, 2017, for which the petitioner submitted a reply on 25.10.2023 offering explanation to few of the allegations and sought time of eight weeks for submission of the explanation/reply to the issues raised at Sl.Nos.5, 6, 7 and 8 in the show cause notice. Thereafter, petitioner requested additional time since details had to be collected from 38 offices spread across seven districts and compare the details available in the head office for the period 2017-18. The additional eight weeks time sought for by the petitioner was to end the last week of December 2023. It is further contended by the learned counsel that it is a fundamental rule of law so also the enactment of the CGST Act, 2017 as per Section 75(4) contemplates an opportunity of hearing. Section 75(4) is extracted here for better understanding. “75. General provisions relating to determination of tax. (4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.” NC: 2024:KHC-D:9776

The provision of Section 75(4) very clearly stipulates that an opportunity of hearing shall be granted on request or where any adverse decision is contemplated against such person. Therefore, learned counsel contends that in the present case on hand in the impugned order passed at Annexure-A, reported in 2022 SCC OnLine All 1088, it is held as under : NC: 2024:KHC-D:9776 “11. The afore-quoted third proviso of section 4M(1) of the Act, 1947 does not contemplate any opportunity of personal hearing in contrast to the provisions of section 75(4) of the CGST/UPGST Act, 2017 which specifically mandates for opportunity of hearing before passing the order. The counter- affidavit has been filed by an officer of the rank of Joint Commissioner, Corporate Circle Commercial Tax, Bareilly who has either not read the aforesaid judgment of the honourable Supreme Court or was not able to understand it and in a casual manner the counter-affidavit has been filed in complete disregard to the statutory mandate of section 75(4) of the Act, 2017. 12. It has also been admitted in the counter- affidavit that except permitting the petitioner to reply to the show-cause notice, opportunity of personal hearing has not been afforded to the petitioner. Thus the legislative mandate of section 75(4) of the Act to the authorities to afford opportunity of hearing to the assessee, i.e., to follow principles of natural justice, has been completely violated by the respondents while passing the impugned order.”

Learned counsel for the petitioner has relied upon the several other provisions of Act, 2017 now what is to be considered is a short point as to whether the respondent authorities have provided suitable opportunity of personal NC: 2024:KHC-D:9776 hearing to the petitioner after issuance of show cause notice and the reply furnished by the petitioner.

Learned AGA representing the State contends that after issuance of show cause notice, the petitioner has replied. Since there was no participation and no application made for a grant of personal hearing, they have considered the reply and proceeded to pass orders in accordance to law. So therefore there is no arbitrariness, illegality or perversity in the orders passed by the respondent authorities.

Having heard the learned counsel for the petitioner and learned AGA for respondents, apparently it is seen that pursuant to issuance of show cause notice, petitioner has replied and provided certain details and thereafter sought for further time to provide certain details to canvass his argument and there is admittedly no personal hearing given to the petitioner prior to passing of the impugned order. Under the circumstances, as contemplated under Section 75(4), it is clear and unambiguous that an opportunity of hearing shall be granted where a request is received in writing from the person or where any adverse decision is contemplated against such person. In the present case, a decision is passed against the NC: 2024:KHC-D:9776 interest of the petitioner. It is incumbent upon the authorities to grant an opportunity of personal hearing to the petitioner, consider the reply and any further materials that would be placed before the Court and pass suitable orders in accordance with law. Having not done so, I do not find the impugned order having complied with the statutory requirement of Section 75(4) of the Act. Under the circumstances, on this short point, without adverting to any merits of the matter, I deem it appropriate to pass the following : ORDER (i) Petition is allowed. (ii) The order dated 30.12.2023 passed by the 2nd respondent-Deputy Commissioner of Commercial Taxes (Audit-4), Hubballi vide Annexure-A is hereby quashed. Consequently, respondent No.2 is directed to provide an opportunity of personal hearing to the petitioner, hear the petitioner, and so also any further documents that would be placed by the petitioner, take it on record and pass suitable orders thereafter in accordance with law. JUDGE CKK CT:BCK LIST NO.: 1 SL NO.: 49