Rean Watertech Private Limited vs. The State Of Madhya Pradesh

Held

The Court held that Section 75(4) of the CGST Act/MPGST Act clearly mandates an opportunity of hearing in two specific situations: (a) where a written request is received from the person chargeable, or (b) where an 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 the term 'opportunity of hearing' encompasses 'personal hearing', especially considering the statutory forms which visualize different stages including a personal hearing. In the present case, an adverse decision was contemplated against the petitioner, and no opportunity of personal hearing was provided. Therefore, the decision-making process was vitiated and contrary to the principles of natural justice and the statutory requirement of Section 75(4). The impugned proceedings after the reply to the show cause notice were set aside. The respondents were directed to provide an opportunity of hearing to the petitioner by an officer other than the one who issued the show cause notice, within three months. The Court explicitly stated that it had not expressed any opinion on the merits of the case.

Facts

The petitioner, Rean Watertech Private Limited, filed a writ petition challenging an adjudication order (GST DRC-07) dated May 17, 2024, passed by the Deputy Commissioner of State Tax, Balaghat. The order raised a demand of Rs. 6,55,69,500/- for excess availment of Input Tax Credit (ITC) and short payment of output GST, along with interest and penalty under Section 73 of the CGST Act and MPGST Act. The petitioner contended that the demand was confirmed without considering their submissions, without seeking supporting documents, and crucially, without affording them an opportunity of personal hearing, thus violating principles of natural justice. The impugned order was passed under Section 74 of the CGST Act/MPGST Act.

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 the right to a hearing, as mandated by Section 75(4) of the CGST Act/MPGST Act? Petitioner's arguments: The petitioner argued that Section 75(4) 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 was obligatory, irrespective of whether they specifically requested it. They relied on judgments from the Madhya Pradesh High Court (Ultratech Cement Ltd.), Gujarat High Court (Graziano Trasmissioni India Pvt. Ltd.), and Allahabad High Court (M/s. BL Pahariya Medical Store). Revenue's arguments: The State argued that Section 75(4) only refers to 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 (DRC-01), which they admittedly did not do. They cited the Supreme Court judgment in Union of India vs. Jesus Sales Corporation to support their contention regarding the interpretation of statutory provisions.