Gujarat High Court Holds Personal Hearing Mandatory Under Section 75(4) of GST Act Before Passing Adverse Order

In a significant decision, the Gujarat High Court has reaffirmed the mandatory requirement of granting a personal hearing under Section 75(4) of the GST Act before passing any adverse order against a taxpayer, regardless of whether a specific request for such hearing is made.

The petitioner, engaged in textile manufacturing, challenged an order passed by the State Tax Officer, which demanded reversal of Input Tax Credit (ITC) and payment of tax, interest, and penalty on the ground that the petitioner’s suppliers were allegedly bogus entities. The petitioner contended that the impugned order was passed without affording the mandatory opportunity of personal hearing as required by Section 75(4) of the GST Act, thereby violating principles of natural justice.

During the proceedings, the petitioner’s counsel emphasized that the absence of a personal hearing rendered the order unsustainable. The State’s counsel was unable to dispute that no such hearing had been granted. The Court noted that the order was passed ex parte, resulting in significant tax and penalty demands against the petitioner.

The High Court relied on its earlier decisions, including Graziano Trasmissioni India Pvt. Ltd. v. State of Gujarat and Alkem Laboratories Ltd. v. Union of India, which had categorically held that Section 75(4) of the GST Act mandates an opportunity of hearing whenever an adverse decision is contemplated, even if the affected party does not expressly request it. The Court reproduced the relevant statutory provision and judicial reasoning, emphasizing that the requirement of a personal hearing is not contingent upon a written request from the taxpayer.

The Court observed that the respondent authority had failed to comply with this statutory mandate, resulting in a violation of natural justice. Consequently, the impugned order dated 17.02.2024 was quashed and set aside, along with all consequential proceedings. The Court directed the respondent authorities to pass a fresh, de novo order after providing the petitioner with an opportunity of hearing and considering the submissions made in accordance with law. The entire exercise was ordered to be completed within twelve weeks from the date of receipt of the Court’s order.

This judgment reinforces the principle that procedural safeguards, such as the right to a personal hearing, are integral to fair adjudication under the GST regime. The decision serves as a clear directive to tax authorities to strictly adhere to the requirements of Section 75(4) before passing any adverse orders.