Passing An Order Without Personal Hearing Not Only Violates The
Statute But Also Breaches The Broader Principles Of Natural Justice: Madras
High Court
1.
Introduction
The Goods and Services
Tax (GST) regime in India introduced a new framework for adjudication of
disputes, assessments, and recovery. To safeguard taxpayer rights, the
legislation embeds principles of natural justice, most notably through Section
75(4) of the CGST Act, 2017, which mandates a personal hearing
before passing any adverse order.
Despite this safeguard,
instances continue where authorities confirm tax demands without granting
taxpayers an opportunity to be heard. This leads to repeated litigation and
judicial intervention. One such recent case is M/s SPB New Alloy Steel Pvt.
Ltd. vs. Assistant Commissioner (ST), where the Madras High Court quashed
an adverse order passed under Section 73 of the CGST/TNGST Act solely on the
ground of violation of Section 75(4).
This case is a timely
reminder that tax adjudication is not merely a mechanical process but
must respect the basic tenets of fairness and natural justice.
2. Case
Details at a Glance
- Case Name:
M/s SPB New Alloy Steel Pvt. Ltd. vs. Assistant Commissioner (ST),
Ganapathy Assessment Circle, Coimbatore
- Court:
High Court of Judicature at Madras
- Coram:
Hon’ble Mr. Justice Krishnan Ramasamy
- Writ Petition No.:
29115 of 2025 with W.M.P. Nos. 32666 & 32668 of 2025
- Date of Judgment:
05 August 2025
- Petitioner:
M/s SPB New Alloy Steel Pvt. Ltd., represented by its Managing
Director, Mr. Subbiah Palaniswamy.
- Respondent:
Assistant Commissioner (ST), Ganapathy Assessment Circle, Coimbatore.
- Subject Matter:
Challenge to assessment order dated 26.02.2025 (Ref. No. ZD3302252654510)
under Section 73 of the CGST/TNGST Act, 2017 for FY 2020-21, uploaded in
Form DRC-07.
- Relief Sought:
Writ of Certiorari to quash the order for violation of Section 75(4) of
the CGST Act and principles of natural justice.
3.
Background and Facts
The petitioner company, M/s
SPB New Alloy Steel Pvt. Ltd., is a registered dealer under the GST regime,
engaged in the steel business in Coimbatore. For the financial year 2020-21,
the jurisdictional officer initiated proceedings under Section 73 of the
CGST/TNGST Act for alleged short payment of tax.
Accordingly, a show
cause notice (SCN) in Form DRC-01 dated 26.11.2024 was issued,
calling upon the petitioner to respond. The petitioner duly filed its reply
in Form GST DRC-06 on 24.02.2025, contesting the proposals.
However, without
affording the petitioner an opportunity of personal hearing, the
respondent passed an assessment order dated 26.02.2025 confirming the
tax demand as proposed in the SCN. The order was also uploaded in Form DRC-07,
crystallizing the liability.
Aggrieved, the petitioner
approached the Madras High Court under Article 226 of the Constitution,
alleging violation of Section 75(4) of the CGST Act and principles of natural
justice.
4.
Submissions by the Petitioner
Counsel for the
petitioner, Mrs. Aparna Nandakumar, advanced the following key
arguments:
1. Violation
of Section 75(4)
o Section
75(4) categorically mandates that “an opportunity of hearing shall be granted
where a request is received in writing from the person chargeable with tax or
penalty, or where any adverse decision is contemplated.”
o Since
the order confirmed the proposals in the SCN against the petitioner, it clearly
amounted to an adverse order. Hence, a personal hearing was mandatory.
2. Principles
of Natural Justice
o Passing
an order without personal hearing not only violates the statute but also
breaches the broader principles of natural justice, namely audi
alteram partem (hear the other side).
3. Restricted
Scope for Writ Court
o While
ordinarily writ courts may not interfere in factual assessments, where there is
a patent violation of statutory mandate, the Court is bound to
intervene.
4. Prayer
for Remand
o The
petitioner urged that the impugned order be set aside and the matter remanded
to the authority for fresh consideration after providing an opportunity of
personal hearing.
5. Defence
by the Respondent
Counsel for the
respondent, Mr. V. Prashanth Kiran, Government Advocate (Taxes), fairly
admitted that:
- Though the petitioner had filed its
reply, no personal hearing was conducted before passing the order.
- Since this was a procedural lapse,
the respondent left it to the discretion of the Court to pass suitable
directions.
This candid concession by
the department significantly narrowed the scope of controversy, leaving only
the legal consequence of non-compliance with Section 75(4) to be adjudicated.
6.
Observations of the Court
Justice Krishnan Ramasamy
made the following critical observations:
1. Mandatory
Nature of Section 75(4)
o The
statute explicitly requires a personal hearing before passing any adverse
order. The use of the word “shall” makes this provision mandatory, not
discretionary.
2. Violation
in the Present Case
o The
impugned order dated 26.02.2025 confirmed the demand in the SCN, which was
adverse to the petitioner.
o However,
no opportunity of personal hearing was granted despite the petitioner having
filed a reply.
o Therefore,
the order suffered from statutory violation as well as breach of natural
justice.
3. Consequences
of Violation
o Any
order passed in contravention of Section 75(4) is unsustainable in law
and liable to be set aside.
7. Final
Judgment
The Court allowed the
writ petition and issued the following directions:
1. Impugned
Order Quashed
o The
assessment order dated 26.02.2025 (Ref. No. ZD3302252654510) was set aside.
2. Remand
for Fresh Consideration
o The
matter was remanded to the respondent for fresh adjudication.
3. Mandatory
Hearing Ordered
o The
respondent was directed to issue a fresh notice, afford a personal hearing
to the petitioner, consider the reply already filed, and then pass orders
strictly in accordance with law.
4. No
Costs
o The
writ petition was allowed without costs, and connected miscellaneous petitions
were closed.
8.
Conclusion and Implications
The ruling in SPB New
Alloy Steel Pvt. Ltd. reinforces the following critical principles:
1. Personal
Hearing is Non-Negotiable
The judgment reiterates that Section 75(4) is not a mere formality. Whenever an
adverse order is contemplated, a personal hearing is mandatory. Non-compliance
will render the order void.
2. Natural
Justice in Tax Adjudication
Tax proceedings cannot be reduced to mechanical confirmations of SCNs. Fair
hearing is the backbone of adjudication, protecting taxpayers from arbitrary
demands.
3. Practical
Guidance for Authorities
Officers must be mindful of statutory requirements and ensure hearings are duly
granted. Procedural shortcuts may save time in the short run but invite
judicial interference later.
4. Relief
for Taxpayers
Taxpayers should vigilantly assert their rights. If denied a personal hearing,
they can successfully challenge the order in writ jurisdiction.
5. Growing
Judicial Trend
This case adds to a consistent line of High Court rulings that quash orders
passed in violation of Section 75(4), thereby strengthening procedural
safeguards under GST.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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