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

Held

The Court held that the 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 the show-cause notice and the reminder notice indicated "NA" for the date, time, and venue of the personal hearing, and the learned Standing Counsel conceded that no personal hearing was granted. The Court relied on its previous decision in Party Time Hospitality Prop. Smt. Punita Gupta Lko. v. State Of U.P. & 2 Others, which held that compliance with Section 75(4) of the GST Act is mandatory. 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 Hardoi, challenged an order dated April 24, 2024, which dismissed their appeal against an earlier order dated February 1, 2022. The original order, passed by respondent no. 3 under Section 74 of the GST Act for the financial year 2019-2020, created a demand of Rs. 9,46,080/-. The petitioner contended that they had mistakenly availed Input Tax Credit (ITC) which was not utilized and had filed a corrected return. A show-cause notice was issued on December 8, 2021, based on a survey conducted on August 21, 2019. The petitioner filed a reply on January 10, 2022, and requested a personal hearing. However, the order dated February 1, 2022, was passed without granting an opportunity of hearing.

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 granting an opportunity of personal hearing as stipulated in Section 75(4) of the GST Act. Petitioner's arguments: The petitioner argued that the original order confirming the demand under Section 74 of the GST Act was passed without providing an opportunity of hearing, which is a violation of Section 75(4) of the GST Act and the principles of natural justice. They emphasized that the show-cause notice and reminder notice indicated "NA" for the date, time, and venue of the personal hearing, rendering the opportunity illusory. They relied on the judgment in Party Time Hospitality Prop. Smt. Punita Gupta Lko. v. State Of U.P. & 2 Others. Respondent's arguments: The learned Standing Counsel, based on instructions, stated that no personal hearing was granted, which was also evident from the impugned order.