Issue of notice of hearing is a statutory requirement U/s. 75(4) Of CGST Act before imposition of tax or penalty.

Issue of notice of hearing is a statutory requirement U/s. 75(4) Of CGST Act before imposition of tax or penalty.

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Issue of notice of hearing is a statutory requirement U/s. 75(4) Of CGST Act before imposition of tax or penalty.

Application of Principle of “natural Justice” vis-à-vis Tax demand by authorities are inter-linked. This is the conclusion that can be drawn in  AP High Court judgement in Writ Petition No.24955/2021.
The provision Section 75(4) of the CGST Act, reads as under:
“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 against such person.”
A Garnishee Notice was issued to the contractor stating that the petitioner had failed to pay taxes, penalty and interest under the GST Act and directed them to pay the said amount.
The order of assessment passed by respondent under AP GST Act, 2017 for the tax periods July, 2017 to June, 2019 imposing tax, penalty and interest was challenged to be violative of principles of natural justice in the Writ Petition.
The copy of the order is as under:
THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND 
THE HON’BLE SMT. JUSTICE V. SUJATHA 
Writ Petition No.24955 of 2021 
ORDER:- (per the Hon’ble Sri Justice C. Praveen Kumar) 
Heard Sri G. Narendra Chetty, learned counsel for the  petitioner and learned Government Pleader for Commercial  Taxes and with their consent the Writ Petition is disposed off at the admission stage.  
  1. The Order of Assessment No.ZH370720OD77052, dated  09.07.2020 and the Rectification Order, dated 25.07.2020 passed by the respondent no.1 under the A.P.G.S.T. Act,  2017, for the Tax periods July, 2017 to June, 2019, imposing  Tax, Penalty and Interest as violative of principles of natural  justice, the present Writ Petition came to be filed. 
  2. The averments made in the affidavit filed, in support of  the Writ Petition, are that:- 
(a) The petitioner executed certain works entrusted to it  by M/s.TATA Projects Limited, and issued Tax Invoices to  M/s.TATA Projects Limited. It is said that as per the terms of  the agreement, the said Contractee has to pay Service Tax on  the same to the petitioner on issue of Tax Invoices by the  petitioner. Though, the petitioner issued Tax Invoices, the  Contractee failed to pay G.S.T. amounts to the petitioner and  withheld the same due to which the petitioner could not file  its returns and pay the Taxes as the G.S.T. Portal will not  accept the returns unless accompanied by payment of Taxes.  
(b) It is said that the total G.S.T. liability for the works executed for the petitioner during the tax period is about  Rs.1,85,84,695/-. A Garnishee Notice dated 11.09.2020,  came to be issued to the Contractor stating that the  petitioner has failed to pay Taxes, Penalty and Interest under  the G.S.T. Act and directed them to pay the said amount. On  coming to know about the order of the Assessment passed by  the authority, the petitioner filed the present Writ Petition  mainly on the ground that an opportunity of hearing should  have been granted to the petitioner in terms of Sub-Section  (4) of Section 75 of the SGST Act, 2017. He placed reliance  on the judgment of this Court in W.P.No.9162 of 2021, dated  28.04.2021 in support of the same.  
  1. Sri G. Narendra Chetty, learned counsel for the  petitioner though raised various grounds would submit that  since no opportunity of hearing was given, the matter to be  remanded back to the Assessing Authority as it came to be  passed in violation of principles of natural justice.  
  2. Sri Y.N. Vivekananda, learned Government Pleader for  Commercial Taxes, would submit that though the  Assessment Order was passed in the month of July, 2020,  the petitioner did not approach this Court within a  reasonable time. He further submits that he approached this  Court only after issuance of Garnishee Notice and long  thereafter, the present Writ Petition is filed. He further  submits that having regard to the orders passed by the  Hon’ble Supreme Court, extending the period of limitation,  the petitioner can avail the remedy of appeal as provided  under Section 107 of the C.G.S.T. Act, 2017
  1. It is no doubt true that the order was passed in the  month of July, 2020 and the Writ Petition was filed in the  month of October, 2021. The reason given by the petitioner  is that due to pandemic, he could not avail the remedy at the  earliest. He further submits that in view of the orders passed  by the Hon’ble Supreme Court extending the period of  limitation, approaching this Court in the year 2021 cannot be  said to be with delay. Infact, in W.P.No.9162 of 2021 relied  upon by the learned counsel for the petitioner, similar such  objection was raised, but the same was not accepted having  regard to the violation of Section 74 of C.G.S.T. Act, which we  will discuss now.  
  2. Sub- Section (4) of Section 75 of the Act, reads as  under:- 
 “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 against  such person.” 
  1. It is very much evident that an opportunity of hearing is  required to be given where a request was made in writing to  the person chargeable with taxes and penalty or where any  adverse decision is contemplated against such person.  Therefore, when the authority contemplates to pass an  adverse order against any assessee, an opportunity of hearing is required to be given. Failure to do so, in our view,  amounts to violation of principles of natural justice. In the  instant case, admittedly no notice was given to the petitioner  before contemplating to pass an adverse order. Such a  course of caution is prejudicial to the interest of assessee and  the same would be in violation of Sub-Section (4) of Section  75 of C.G.S.T. Act, 2017.  
  2. For the above said reasons, the Writ Petition is allowed,  setting aside the Assessment Order No.  No.ZH370720OD77052, dated 09.07.2020 and the  Rectification Order, dated 25.07.2020 passed by the  respondent no.1 under the G.S.T. Act, 2017, and remanding  the matter to respondent no.1 for consideration of the issues and for passing appropriate orders in accordance with law  afresh after giving notice of hearing to the petitioner. It is  needless to mention that on the date so fixed either the  petitioner or his authorized representative shall be present  before the respondent no.1 for personal hearing. The entire  exercise of giving notice, hearing and passing of the order  should takes place as early as possible preferably within a  period of four (4) weeks from the date of receipt of this order.  There shall be no order as to costs.
Miscellaneous petitions pending, if any, shall stand  closed.
_______________________________ 
JUSTICE C.PRAVEEN KUMAR 
_______________________ 
JUSTICE V. SUJATHA 
Date: 21.03.2022 
MS
THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR
AND  
THE HON’BLE SMT. JUSTICE V. SUJATHA 
Writ Petition No.24955 of 2021 
(per the Hon’ble Sri Justice C. Praveen Kumar) 
Date: 21.03.202

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