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

Held

The Court held that the original order dated 01.02.2022, 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 previously interpreted by the Court in the case of Party Time Hospitality Prop. Smt. Punita Gupta Lko. v. State Of U.P. & 2 Others, where compliance with Section 75(4) was deemed mandatory. The Court found that the show-cause notice and reminder notice did not clearly indicate the date, time, and venue for personal hearing, and the revenue conceded that no personal hearing was granted. Consequently, the order dated 01.02.2022 was quashed. As the original order was quashed, the appellate order dated 24.04.2024 was also quashed. The matter was remanded to respondent no. 3 to pass fresh orders after providing an opportunity of hearing and allowing the petitioner to file a reply to the show-cause notice.

Facts

The petitioner, M/s Prakash Iron Store Hardoi U.P., challenged two orders: an order dated 01.02.2022 passed by respondent no. 3, which created a demand under Section 74 of the GST Act for the Financial Year 2018-2019, and an order dated 24.04.2024, which dismissed the petitioner's appeal against the first order. The petitioner claimed to have bonafidely availed Input Tax Credit (ITC) which was not utilized and subsequently filed a corrected return. A show-cause notice under Section 74 of the GST Act was issued on 08.12.2021, proposing a liability of Rs. 17,01,000/-, based on a survey conducted on 21.08.2019. The petitioner filed a reply on 10.01.2022 and requested a personal hearing, but the order was passed without granting one.

Key Issues

1. Whether the order dated 01.02.2022, 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, and for violating principles of natural justice? Petitioner's arguments: The petitioner contended that the original order under Section 74 was passed without providing an opportunity of hearing, despite a request for the same, thus violating Section 75(4) of the GST Act and principles of natural justice. The petitioner emphasized that the show-cause notice itself had indicated 'NA' for the date, time, and venue of the personal hearing, and this deficiency persisted even in the reminder notice. Revenue's arguments: The learned Standing Counsel, based on instructions, conceded that no personal hearing was granted, which was also evident from the impugned order.