M/S Patanjali Ayurved Limited Indore Through Its Autorized Signatory And Cfo Shri Yaj Devi Arya vs. The State Of Madhya Pradesh

Held

The Court held that Section 75(4) of the CGST Act/MPGST Act clearly mandates that an opportunity of hearing shall be granted in two situations: (a) where a written request is received from the person chargeable with tax or penalty, or (b) where any adverse decision is contemplated against such person. The Court emphasized the use of the word 'or', indicating that an opportunity of hearing is required even if no specific request is made, provided an adverse decision is contemplated. The Court found substance in the Petitioner's argument that 'opportunity of hearing' includes the opportunity of 'personal hearing', as statutory forms visualize different stages, including the date, venue, and time of personal hearing. In the present case, an adverse decision was contemplated against the Petitioner, and no opportunity of personal hearing was provided. Consequently, the decision-making process adopted by the respondents was vitiated and contrary to the principles of natural justice and the statutory requirement of Section 75(4). The Court set aside the impugned proceedings after the stage of reply to the show cause notices and directed the respondents to provide an opportunity of hearing to the Petitioners by an officer other than the one who issued the show cause notice. The Court explicitly stated that it had not expressed any opinion on the merits of the case.

Facts

The Petitioner, M/s Patanjali Ayurved Limited, filed two writ petitions challenging adjudication orders passed by the Deputy Commissioner of State Tax, Indore. The orders, in Form GST DRC-07, raised demands for excess Input Tax Credit (ITC) amounting to Rs. 78,49,607/- (CGST, MPGST, and IGST components) along with interest and penalty under Section 74 of the CGST Act and MPGST Act. The Petitioner contended that these orders were passed without considering their submissions and without providing an opportunity of hearing, thus violating the principles of natural justice. The tax period for the demands is not explicitly stated but relates to the adjudication of ITC. The procedural history involves the issuance of show cause notices, the Petitioner's reply, and the subsequent passing of the impugned orders.

Key Issues

1. Whether the adjudication order passed under Section 74 of the CGST Act/MPGST Act is in violation of the principles of natural justice, specifically regarding the opportunity of hearing, as mandated by Section 75(4) of the CGST Act/MPGST Act? Petitioner's Arguments: The Petitioner argued that Section 75(4) of the CGST Act/MPGST Act mandates an opportunity of hearing in two situations: (a) when a written request is received, or (b) when an adverse decision is contemplated. They contended that since an adverse decision was contemplated against them, a personal hearing ought to have been provided, irrespective of whether they specifically requested it. They relied on judgments from the Madhya Pradesh High Court (Ultratech Cement Ltd. vs. Union of India), Gujarat High Court (Graziano Trasmissioni India Pvt. Ltd. vs. State of Gujarat), and Allahabad High Court (M/s. BL Pahariya Medical Store vs. State of U.P. And another). Revenue's Arguments: The Revenue argued that Section 75(4) only speaks of an 'opportunity of hearing' and not necessarily a 'personal hearing'. They contended that the Petitioner was required to opt for a 'personal hearing' in response to the show cause notice (Form DRC-01), which they admittedly did not do. Therefore, no fault could be found in the respondents' actions. They relied on the Supreme Court judgment in Union of India and Another vs. Jesus Sales Corporation.