Mandatory Hearing Under Section 75(4): Madras High Court
1.
Introduction
The Goods and Services
Tax (GST) law, though designed to simplify indirect taxation in India, has
triggered extensive litigation on the question of procedural safeguards and
natural justice. One such safeguard, enshrined in Section 75(4) of the
CGST Act, 2017, requires authorities to grant an assessee an opportunity
of personal hearing before passing any order adverse to them.
Despite this explicit
mandate, many cases have surfaced where orders confirming huge tax demands were
issued without such hearings. The Madras High Court, in the case of M/s
Seetu Fan House vs. Deputy State Tax Officer-II, delivered on 05 August
2025, reiterates that compliance with Section 75(4) is not optional but
mandatory.
This article provides an
in-depth analysis of the judgment, tracing the facts, submissions, court’s
reasoning, and its implications for taxpayers and GST authorities.
2. Case
Details
- Case Name:
M/s Seetu Fan House vs. Deputy State Tax Officer-II, Kothalwalchavadi
Assessment Circle, Chennai
- Court:
Madras High Court
- Coram:
Hon’ble Justice Krishnan Ramasamy
- Writ Petition No.:
20663 of 2025 (with W.M.P. Nos. 23285 & 23290 of 2025)
- Date of Judgment:
05 August 2025
- Petitioner:
M/s Seetu Fan House, represented by Partner, Mr. Alpesh Jain
- Respondent:
Deputy State Tax Officer-II, Kothalwalchavadi Assessment Circle, Chennai
- Subject of Dispute:
Challenge to assessment order dated 22.08.2024 relating to AY 2019-20,
passed under the CGST Act, 2017, on the ground of violation of Section
75(4) and natural justice.
3. Factual
Background
The petitioner, M/s
Seetu Fan House, is a GST-registered dealer engaged in trading activities
at Chennai. For the Assessment Year 2019-20, the respondent issued a show
cause notice in Form GST DRC-01 dated 21.05.2024, proposing certain tax
demands.
Upon receipt, the
petitioner filed a detailed reply in Form GST DRC-06 on 17.08.2024,
contesting the allegations and providing explanations. However, without
affording a personal hearing, the respondent proceeded to pass an assessment
order dated 22.08.2024, confirming the proposals in the SCN.
The petitioner alleged
that this order violated Section 75(4) of the CGST Act, which mandates
granting an opportunity of hearing before passing any adverse order. Left with
no alternative, the petitioner invoked the writ jurisdiction of the Madras High
Court.
4.
Submissions of the Petitioner
Learned counsel for the
petitioner, Mr. K.M. Malarmannan, made the following key submissions:
1. Mandatory
Hearing Under Section 75(4):
The provision requires that where an adverse decision is contemplated, the
assessee must be afforded a hearing. The order confirming the SCN was adverse,
and therefore the absence of a personal hearing renders the order illegal.
2. Distinction
Between Favorable and Adverse Orders:
If the authority accepts the reply and drops proceedings, hearing may not be
necessary. But where demand is confirmed, hearing is a statutory necessity.
3. Violation
of Natural Justice:
Denial of hearing breaches the fundamental principles of natural justice (audi
alteram partem), leading to arbitrariness.
4. Relief
Sought:
The petitioner prayed that the impugned order dated 22.08.2024 be quashed and
the matter remanded to the respondent for fresh adjudication after granting a
personal hearing.
5. Defence
by the Respondent
On behalf of the
respondent, Ms. P. Selvi, Government Advocate (Taxes), made a candid
admission. She acknowledged that:
- Though the petitioner had filed a
reply, no personal hearing was given prior to passing the impugned
order.
- In view of this procedural lapse, she
submitted that the Court may pass appropriate directions.
This admission narrowed
the controversy to a straightforward question of law—whether the absence of a
hearing under Section 75(4) invalidates the order.
6.
Observations of the Court
Justice Krishnan Ramasamy
carefully analyzed the issue and made the following observations:
1. Statutory
Mandate of Section 75(4):
The provision clearly mandates that before passing an adverse order, the
assessee must be afforded a hearing. The use of the word “shall”
indicates compulsion, leaving no discretion to the authority.
2. Facts
of the Case:
In this case, the SCN was issued on 21.05.2024, the reply was filed on
17.08.2024, but without hearing, the order was passed on 22.08.2024 confirming
the demand. Thus, the requirement of Section 75(4) was undeniably violated.
3. Violation
of Natural Justice:
Denial of hearing results not only in statutory violation but also in breach of
natural justice, making the order unsustainable in law.
4. Precedent
and Consistency:
The Court followed its consistent line of rulings where orders passed without
hearings were quashed and matters remanded.
7. Final
Judgment
The Court allowed the
writ petition and issued the following directions:
1. The
impugned order dated 22.08.2024 was quashed.
2. The
matter was remanded to the respondent for fresh consideration.
3. The
respondent was directed to issue a fresh notice, grant the petitioner a personal
hearing, consider the reply already filed, and then pass orders in
accordance with law.
4. The
writ petition was allowed without costs. Connected miscellaneous petitions were
also closed.
8.
Conclusion and Implications
The ruling in Seetu
Fan House vs. Deputy State Tax Officer-II reinforces several crucial
principles:
- Personal Hearing is Mandatory:
Whenever adverse orders are contemplated, authorities must grant hearings
under Section 75(4).
- Natural Justice Cannot Be
Compromised: Even in fiscal statutes, compliance
with natural justice is fundamental.
- Administrative Accountability:
Tax authorities must be cautious; failure to follow procedure invites
judicial intervention and quashing of orders.
- Relief for Taxpayers:
Assessees have a robust remedy if denied hearing—they can successfully
challenge such orders in writ jurisdiction.
- Judicial Consistency:
The Madras High Court has consistently quashed orders passed in breach of
Section 75(4), strengthening procedural fairness in GST adjudication.
This judgment is yet
another reaffirmation that tax collection cannot come at the cost of
fairness. Authorities must strike a balance between safeguarding revenue
and respecting taxpayer rights.
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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