M/S Technosys Security System Private Limited vs. Commissioner Commercial Taxes

Held

The Court held that Section 75(4) of the GST 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 significance 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 statutory form DRC-01, by providing for details of personal hearing (date, time, venue), visualizes distinct stages, implying that 'opportunity of hearing' encompasses 'personal hearing'. Since an adverse decision was contemplated against the petitioners in both cases, and no opportunity of personal hearing was provided, the decision-making process was vitiated and contrary to principles of natural justice and the statutory requirement of Section 75(4). Consequently, the impugned proceedings after the stage of the reply to the show cause notices were set aside. The respondents were directed 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 it had not expressed any opinion on the merits of the case.

Facts

The petitioners, M/s Technosys Security System Private Limited, challenged show cause notices and subsequent orders imposing tax, interest, and penalty. In Writ Petition No. 13618 of 2023, a show cause notice dated 7.10.2022 proposed an amount of Rs. 7.37 crores, while the final order dated 17.2.2023 quantified the demand at Rs. 9.76 crores. In a connected matter, the show cause notice mentioned Rs. 1.18 crores, but the final demand was Rs. 14.56 crores. The petitioners argued that the authorities failed to provide an opportunity of hearing, violating principles of natural justice and Section 75(4) of the GST Act. The tax period is not explicitly stated, nor is the authority that passed the initial order under challenge, other than the Deputy Commissioner, State Tax, Bhopal.

Key Issues

1. Whether the respondents violated the principles of natural justice and the statutory mandate of Section 75(4) of the Goods and Services Tax (Act) by failing to provide an opportunity of hearing to the petitioners? Petitioner's Arguments: The petitioner contended that Section 75(4) of the GST Act mandates an opportunity of hearing in two situations: (i) when a specific written request is received, or (ii) when an adverse decision is contemplated. They argued that since an adverse decision was contemplated and ultimately issued, a personal hearing was mandatory irrespective of whether a specific request was made. 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). They also pointed to the statutory form DRC-01, which includes details for personal hearing, suggesting a distinction between filing a reply and a personal hearing. Revenue's Arguments: The State argued that Section 75(4) only mandates an 'opportunity of hearing' and not necessarily a 'personal hearing'. They contended that the petitioner was required to opt for a personal hearing in the prescribed form DRC-01, which they admittedly did not do. Therefore, no fault could be found with the respondents' actions.