Is Personal Hearing Mandatory Before Passing an Order?

Whenever any taxable person violates any provision of the GST Act and the department serves the shown cause notice to said person. In such situation the said person has certain rights and the department has certain duties which are to be followed by the department. To provide an opportunity of personal hearing is also one of them. In this article we will discuss what GST law states about the personal hearing before passing an order or if any order is passed without providing any personal hearing whether it would be valid or not.

Section 73 and Section 74 of CGST Act contains the provisions of issuance of show cause notice and passing an order of demand and adjudication of the same. However it has no where mentioned under section 73 and section 74 about providing personal hearing to the noticee. These provisions only mandate the adjudicating authority to consider the representation, if any, made by the noticee. Such representation is typically the written reply usually submitted by the taxpayers.

Section 75 of CGST Act 2017 contains the general provisions relating to determination of tax. Under sub section 4 of section 75 it is stated 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 against such person.

Hence section 75(4) clearly states that the personal hearing should be given if the taxpayer requests for the same or if an adverse order is to be passed against such order.  Also there are various judgements of High Courts wherein it was held that the personal hearing shall be granted in all cases where a specific request is received or where adverse decision against the assessee is contemplated.

Eveready Industries India Ltd. Versus State Of U.P. [2024(05)LCX0353], brief summary of the case is as follows;

The Petitioner (Eveready Industries) has filed a writ petition against the order passed by the Revenue Department on the ground that despite the section 75(4) of the Act requires providing personal hearing,  no opportunity of personal hearing was granted even though the petitioner specifically requested for personal hearing. Hence said order was passed in violation of the settled principles of natural justice.

The Hon’ble Allahabad High Court has allowed the said writ petition and the impugned order was set aside and it was directed that the matters be remanded back to proper officer for granting of opportunity of personal hearing.

Similarly in case of B.M. Patel & Co versus The State Tax Officer [2021(01)LCX0131] the Madras High Court set aside the order as the personal hearing was not provided to the petitioner. The brief summary of the case is as follows;

The petitioner challenges order dated 24.08.2020 and the main ground argued is violation of principles of natural justice on the ground that the petitioner was not heard in person prior to passing of the impugned order. Reliance was placed on the provisions of Section 75(4) of the CGST Act 2017, which requires the Officer to grant an opportunity of hearing where a specific request in that regard is received from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.

The Revenue had defended the impugned order stating that there has been no request received from the petitioner seeking a personal hearing and in response to the show cause notice, a reply was filed setting forth an explanation to the proposals on the notice. In the absence of a specific request for personal hearing, there is, according to the revenue, no necessity for extending opportunity per se.

The Hon’ble Madras High Court held that it is incumbent upon the revenue to extend an opportunity of personal hearing to the petitioner. Thus the said writ petition was allowed and the impugned order is set aside.

Conclusion: The personal hearing should be given if the taxpayer requests for the same or if an adverse order is to be passed against such order.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.