M/S S.A. Traders , Lko. Thru. Its Proprietor Sanjay Agarwal vs. State Of U.P. Thru. Prin. Secy. (Institutional Finance) U.P. Govt. Lko. And Another

Held

The Court held that Section 75(4) of the U.P. GST Act, 2017, mandates an opportunity of hearing when an adverse decision is contemplated against a person chargeable with tax or penalty. The Court agreed with the coordinate bench's interpretation in *Bharat Mint & Allied Chemicals*, stating that an assessee is not required to formally request a personal hearing; it is mandatory for the Assessing Authority to provide one before passing an adverse order. The Court found that the petitioner marking "NA" or not explicitly choosing to avail a personal hearing in the notice had no legal consequence. The principle of natural justice requires such an opportunity, especially when a significant civil liability is imposed. The Court reasoned that affording a hearing allows the authority to pass a reasoned order and facilitates better appreciation at the appellate stage. Consequently, the impugned order was set aside, and the matter was remitted to the Deputy Commissioner for a fresh notice and proceedings, ensuring an opportunity of hearing is granted.

Facts

The petitioner, M/s S.A. Traders, through its Proprietor Sanjay Agarwal, challenged an order dated 05.07.2023 passed by the Deputy Commissioner, State Tax, Sector-17, Lucknow. This order raised a demand exceeding Rs. 65,284,344/- against the petitioner for the tax period 2021-22. The petitioner's sole contention was that they were denied an opportunity of oral hearing. The notice issued on 20.03.2023 indicated "NA" against the columns for the date, time, and venue of the personal hearing, effectively precluding any such opportunity.

Key Issues

1. Whether the Assessing Authority was bound to afford an opportunity of personal hearing to the petitioner before passing an adverse assessment order, as per Section 75(4) of the U.P. GST Act, 2017, despite the petitioner not explicitly requesting it or marking a choice to avail it? The petitioner argued that Section 75(4) mandates an opportunity of hearing when an adverse decision is contemplated, irrespective of whether the assessee requests it. They relied on the interpretation of this section by a coordinate bench of the High Court in *Bharat Mint & Allied Chemicals Vs. Commissioner Commerical Tax & 2 Ors.* and a Gujarat High Court decision in *M/S Hitech Sweet Water Technologies Pvt. Ltd. Vs. State of Gujarat*. The petitioner contended that the adverse assessment order, raising a disputed demand of approximately Rs. 19 lacs, was passed in violation of this principle and natural justice. The respondent, State of U.P., did not record any specific arguments against the petitioner's submissions.