M/S Prakash Iron Store,Hardoi Thru. Proprietor vs. State Of U.P. Thru. Prin. Secy. (Deptt. Of State Tax )Lko. And 2 Others

Held

The Court held that the original order dated February 1, 2022, passed under Section 74 of the GST Act, was contrary to the mandate of Section 75(4) of the GST Act and violative of the principles of natural justice. The Court noted that Section 75(4) mandates granting an opportunity of hearing when an adverse decision is contemplated. This provision was interpreted by the Court in the case of Party Time Hospitality Prop. Smt. Punita Gupta Lko. v. State Of U.P. & 2 Others, where it was held to be mandatory. The Court found that the show-cause notice and reminder notice did not indicate the date, time, or venue for a personal hearing, with 'NA' being transcribed in those columns. The learned Standing Counsel conceded that no personal hearing was granted. Consequently, the order dated February 1, 2022, was quashed. As the original order was quashed, the subsequent appellate order dated April 24, 2024, was also quashed. The matter was remanded to respondent no. 3 to pass fresh orders after providing an opportunity of hearing and permitting the petitioner to file a reply to the show-cause notice, in accordance with law.

Facts

The petitioner, M/s Prakash Iron Store, challenged an order dated April 24, 2024, which dismissed their appeal under Section 107 of the GST Act. They also challenged an order dated February 1, 2022, passed by respondent no. 3, which created a demand under Section 74 of the GST Act for the financial year 2017-2018. The petitioner claimed to have bonafidely availed Input Tax Credit (ITC) which was not utilized and filed a corrected return in July 2019. A show-cause notice dated December 8, 2021, was issued, proposing a liability of Rs. 2,98,333/-, based on a survey conducted on August 21, 2019. The petitioner filed a reply on January 10, 2022, and requested a personal hearing, but an order was passed without granting one.

Key Issues

1. Whether the order dated February 1, 2022, passed under Section 74 of the GST Act is liable to be quashed for non-compliance with the mandatory requirement of providing an opportunity of hearing as stipulated in Section 75(4) of the GST Act? Petitioner's Contention: The petitioner argued that the original order dated February 1, 2022, confirming the demand under Section 74 of the GST Act was passed without providing an opportunity of hearing, which is a mandatory requirement under Section 75(4) of the GST Act. They emphasized that the show-cause notice and reminder notice indicated 'NA' for the date, time, and venue of the personal hearing. They relied on the judgment of this Court in Party Time Hospitality Prop. Smt. Punita Gupta Lko. v. State Of U.P. & 2 Others (Writ Tax No.176 of 2023). Respondent's Contention: The learned Standing Counsel, based on instructions, stated that no personal hearing was granted, which was also evident from the impugned order.