Calcutta High Court Holds GST Assessment Order Void for Failure to Serve Show Cause Notice and Denial of Hearing

Background and Challenge:
The petitioners challenged the legality of an ex parte order dated 02.11.2023 passed under Section 74 of the GST Act by the respondent authority, which raised a tax demand including penalty. The impugned order was based on a show cause-cum-demand notice dated 19.05.2023 for the period July 27, 2017 to March 2019. The petitioners contended that the proceedings were vitiated by procedural irregularities and violation of statutory provisions.

Procedural Irregularities and Service of Notice:
The Court noted that no notice in Form GST ASMT-10 was issued under Section 61 prior to the show cause notice, nor was any adjournment granted as required by Section 75(5). Crucially, the adjudicating authority passed the order without giving the petitioners an opportunity of hearing or serving any notice of hearing, thereby violating the principles of natural justice.

The petitioners argued that the show cause notice was uploaded in the ‘Additional Notices order tab’ instead of the ‘view notices order tab’ on the GST portal, contrary to Section 169 of the Act. They further asserted that the notice was never served by registered post or email, and the State failed to produce any evidence of proper service.

Legal Precedents and Court’s Reasoning:
The petitioners relied on prior Calcutta High Court judgments, including St Xaviers College Calcutta Alumni Association v. Dy. Commissioner of Revenue CGST and Goutam Bhowmik v. State of West Bengal, which emphasized the mandatory nature of affording an opportunity of hearing before passing adverse orders and held that breach of such statutory mandates cannot be cured by the existence of an appellate remedy.

The respondent authorities contended that three opportunities for personal hearing were granted, but the petitioners failed to avail them. However, the Court found that the record reflected gross technical and procedural irregularities, including the lack of proper service and denial of a fair hearing.

Legal Principle and Final Directions:
The Court reaffirmed that it is mandatory for the respondent authority to afford an opportunity of hearing to the petitioners in response to the show cause-cum-demand notice. An assessment order passed in haste, without considering material evidence and reply, amounts to a gross violation of natural justice.

Accordingly, the Court quashed and set aside the order dated 02.11.2023. The petitioners were directed to file a physical reply to the show cause-cum-demand notice within 15 days, which the respondent authority must consider within three months by passing a reasoned order after granting a hearing, either virtually or physically. The Court further mandated that notice of hearing be served by all possible modes, including registered post, portal upload, and email.

The writ petition was disposed of without adjudicating the merits of the case.