M/S Vishnu Essence Through Its Partner Amit Bothra vs. The State Of Madhya Pradesh

Held

The Court held that the authority committed an apparent error of law by not affording an opportunity of personal hearing, which is statutorily provided under Section 75(4) of the MPGST Act. This failure vitiates the proceedings. The Court relied on its previous judgment in Technosys Security System (P) Ltd. (supra), which elaborated on the provisions of Section 75(4). The Court emphasized that Section 75(4) mandates an opportunity of hearing where a request is received in writing or where an adverse decision is contemplated. The judgment noted that even if the petitioner had not specifically asked for a personal hearing, an adverse decision was contemplated, making it obligatory for the respondents to provide such an opportunity. The Court found that admittedly, no opportunity of personal hearing was provided, thus vitiating the decision-making process and running contrary to the principles of natural justice and the statutory requirement. Consequently, the impugned order dated 09.06.2023 was quashed, and the cases were remanded back to the authority for deciding afresh after affording an opportunity of personal hearing to the petitioners.

Facts

The petitioners, M/s Vishnu Essence, filed two writ petitions challenging an order dated 09.06.2023 (DRC-07) passed by Respondent No. 3, the Deputy Commissioner of State Tax, for the periods 2018-19 and 2019-20. The impugned order was passed under Section 74(9) of the Madhya Pradesh Goods and Services Tax Act, 2017 (MPGST Act). The petitioners contended that the order was cryptic, non-speaking, and passed without application of mind, violating principles of natural justice. Specifically, they argued that despite a written request, they were not afforded a mandatory personal hearing as required by Section 75(4) of the MPGST Act. The proceedings were initiated following a search and seizure action under Section 67 of the MPGST Act on 10.01.2020, which led to a report and subsequent intimation (DRC-01A) demanding additional liabilities based on a Chartered Engineer's report and estimated electricity consumption.

Key Issues

1. Whether the impugned order DRC-07 dated 09.06.2023, passed under Section 74(9) of the MPGST Act, is liable to be quashed for being cryptic, non-speaking, and non-reasoned, thereby violating principles of natural justice? (Question of law) 2. Whether the failure to provide a mandatory personal hearing to the petitioner, despite a written request, in terms of Section 75(4) of the MPGST Act, vitiates the impugned order? (Question of mixed law and fact) Petitioner's Arguments: The petitioner argued that the impugned order is bad in law as it was passed without affording an opportunity of hearing as mandated by Section 75(4) of the MPGST Act. They relied on the judgments in Technosys Security System (P) Ltd. Vs. Commissioner, Commercial Taxes and Future Consumer Ltd. Vs. State of M.P. The petitioner also contended that any determination of tax under Section 74 based on a search and seizure under Section 67 must be based on material recovered during the search, and additions cannot be made on items already recorded in books of account, such as electricity fluctuation and consumption. They further argued that levying tax and penalty solely on the basis of electricity consumption is illegal. Revenue's Arguments: The respondent State opposed the prayer, arguing that no exception can be taken to the impugned order as it was passed following the due procedure as provided under the law.