Why Hearing the Taxpayer is Important Under GST?

In any tax regime in India, there must be effective communication between the taxpayers and the departmental authorities for ensuring transparency, compliance and fairness. However, this becomes more critical under Goods and Services Tax framework, which aims to simplify the tax system while ensuring it remains vigorous and unbiased. There is one cornerstone of this system i.e. the need to hear and address the concerns of taxpayers. Engaging with the taxpayers helps in developing trust and ensuring that their grievances, suggestions and challenges are heard which ultimately allows the tax system to develop in response to the real world.

The developing GST regime has brought both opportunities and challenges, regularly leaving taxpayers feeling overburdened by the complicated rules and frequent amendments. So, hearing the taxpayers helps authorities to clarify issues and better compliance. This article examines why hearing the taxpayer is essential for a fair and efficient GST system.

What is a "hearing" in legal terms under GST?

In legal terms, "hearing" refers to the opportunity given to an individual to present their case before an authority, basis which the decisions are made. In India, under GST framework, a hearing is a fundamental aspect of natural justice which ensures that the taxpayers are not subjected to penalties, demand or any adverse decisions without being given a fair chance to explain their position.

In various provisions of GST law, the right to be heard is embedded, especially during the proceedings such as:

• Assessments;

• Audits;

• Adjudications;

• Cancellation of registration;

• Any other recovery action.

In other words, a hearing under GST is not just a procedural formality, it is a safeguard that protects taxpayers from inconsistent actions and promotes accountability in tax administration by appearing in person or through its legal representative. Hence, this strengthens trust in the system by ensuring transparency, fairness, and the right to a reasonable defense.

What happens when hearing is denied?

If a proper officer issues a demand or penalty without giving the taxpayer a proper opportunity to explain, the taxpayer can challenge the same in court, as this violates the essence of Article 14 of the Indian Constitution and the foundational principle of natural justice. In several cases, High Courts have quashed GST orders merely because the department did not follow the rules of natural justice. One of the case is Rameshwar Das Ram Niwas Versus State Of U.P. [2025(03)LCX0104], wherein the Hon’ble Allahabad High Court observed that opportunity of hearing was not provided before passing an order and quashed the same, as it was passed in violation of Article 14 of the Constitution of India.

Now here comes safeguarding fairness and transparency i.e. The Principle of Natural Justice.

The Principle of Natural Justice

The principle of natural justice is a fundamental principle of fair treatment in legal and administrative proceedings. This principle safeguards the rights of individuals and prevents the abuse of power by those in authority. Further, it encourages transparency, accountability and natural justice that help in building public confidence in the legal and regulatory systems. In essence, natural justice is a cornerstone of a just and fair legal system, ensuring that decisions are made with due regard for procedural fairness and the rights of all parties involved.

Natural justice is not organized in a single statute but is derived from common law and upheld by Indian courts as an essential requirement of fair procedure. It comprises of two essential rules, which plays a vital role in tax administration under GST Act also. Let’s understand them in brief.

1. Audi Alteram Partem- "Let the other side be heard"

This is the most widely recognized component of natural justice and is particularly crucial under GST. This ensures that no person is punished, assessed, or penalized without being given a fair and reasonable opportunity. The right to be heard before any adverse action is taken in cases such as cancellation of registration, issuance of tax demand, imposition of penalties or denial of input tax credit, is a direct application of this principle. The taxpayers must be given a fair opportunity to respond to notices, present their supporting evidences, explain their case and rectify any errors before passing any adverse order by the adjudicating authorities. In GST, this rule is invoked in various situations:

• Show Cause Notices (SCNs): Before initiating any recovery, levy of penalty, cancellation of registration of taxpayer, the adjudicating authorities must issue a show cause notice explaining the reasons for the action taken by them. Accordingly, the taxpayer is given time to respond and defend the case.

• Personal Hearings: In many cases, the consequences are serious, then the taxpayers are provided a personal hearing where they can present their case by producing documents and presenting arguments to clarify their stand.

• Order must consider reply: A critical part of this principle is that the final adjudicating order must consider the reply submitted by the taxpayer and address the points raised. Ignoring the taxpayer’s submissions can render the order invalid in the eyes of the law.

Further, the judgment of Allahabad High Court in the case of Eastern Machine Bricks And Tiles Industries Versus STATE OF U.P. AND OTHERS [2024(01)LCX0070], wherein the Hon’ble High Court has reaffirmed that the principle of audi alteram partem (right to a fair hearing) is a universally applicable part of natural justice, rooted in constitutional ideals of equality and due process. It protects individuals from arbitrary or unfair decisions by requiring that they be given a proper opportunity to respond before any adverse action is taken.

Therefore, the core idea is simple and powerful, i.e. no adverse decision should be made behind the taxpayer’s back. Hence, this principle prevents arbitrary actions and protects the rights of individual or taxpayers to a fair trial.

2. Nemo Judex in Causa Sua – "No One Should Be a Judge in Their Own Cause"

The principle of natural justice not only requires that a person be given an opportunity to be heard (audi alteram partem), but also demands that decisions be made by an impartial authority. This is embodied in the second core rule of natural justice. In other words, this principle deals with impartiality and the absence of unfairness. It ensures that a person or authority who has a personal interest in the outcome of a matter does not act as the judge or decision-maker in that matter. In the context of the GST regime in India, this rule is critical to maintain objectivity, fairness, and credibility in the adjudication process initiated against the taxpayer.

In GST, proper officers are vested with significant powers i.e ranging from audits and investigations to assessments, penalty imposition, and even cancellation of registrations. To maintain trust in this framework, it is essential that the proper officer who initiates or investigates a case does not act as the final adjudicating authority in the same case.

This is where the principle of nemo judex in causa sua plays a vital role. It ensures that:

• Investigating officers do not act as final adjudicators: If an investigating officer who built the case is allowed to adjudicate it, the decision is likely to be biased.

• Appeal & review mechanisms remain independent: The GST law provides for appellate authorities and tribunals that are structurally separate from the original adjudicating authorities, which strengthens this principle.

• Judicial review remains available: If a taxpayer believes that a decision has been made in violation of this principle—i.e., by a biased or conflicted officer, then they can challenge it through appropriate legal forums, including GST Appellate Tribunal or the High Courts.

Further, in the case of Agmotex Fabrics Private Limited Versus State Of Uttar Pradesh [2024(11)LCX0324], wherein the Allahabad High Court observed that the pillar of natural justice: impartiality in decision-making (nemo judex in causa sua) is violated and accordingly, the impugned order was held to be arbitrary, prejudicial, and legally unsustainable, and the Court quashed it with directions to provide all documents, grant a proper hearing, and pass a reasoned, unbiased order.

Therefore, in GST, the principles of natural justice are not just legal formalities—they are the foundation of fairness and transparency. Upholding "audi alteram partem" ensures that taxpayers have a voice, while "nemo judex in causa sua" guarantees unbiased adjudication. Together, they form the base of ethical and lawful tax governance, essential for sustaining both regulatory ethics and public confidence.

Legal Backing under GST Law

The GST law specifically 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, 2017 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(4) of the Act states 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. The relevant extract of the same is:

(4) 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.

From the perusal of above, the right to a personal hearing, though not automatic, becomes mandatory under specific conditions to uphold principles of natural justice. Hence, personal hearing should be given if the taxpayer requests for the same or if an adverse order is to be passed against such order.

Why Hearing is Beneficial for both sides i.e Taxpayers and Departments?

In the GST framework, the process of providing a hearing before passing any adverse order is not just a legal formality; it is a vital administrative tool that benefits both the taxpayer and the tax department.

Benefits to Taxpayers:

• Opportunity to Present Their Case

• Prevention of Arbitrary Decisions

• Reduction in Penalties and Disputes

• Better Understanding of Legal Provisions

• Right to Be Heard (Natural Justice)

Benefits to Department:

• More Accurate and Informed Decisions

• Improved Compliance and Voluntary Resolution

• Reduction in Appeals and Litigation

• Enhanced Credibility and Transparency

• Feedback for Policy Improvement

Ethical points to keep in mind while attending a personal hearing under GST

• Submission of Power of Attorney: If the taxpayer is represented by someone else (like a Chartered Accountant, Advocate, GST Practitioner, or any authorized person), they must submit POA (Power of Attorney).

Types of Power of Attorney:

- General POA: Broad authority for various tasks like Income Tax, GST, ESI and PF etc.

- Special POA: Limited to specific duties, such as GST representation only.

• Professional Conduct and Courtroom Ethics: Even though GST proceedings are quasi-judicial and not conducted in a courtroom, proper decorum must be maintained.

- Appear in formal business attire.

- Be Punctual and respectful

- Avoid Interruptions

• Number of Personal Hearings: The GST law does not specify a fixed number of hearings. However, based on principles of natural justice and departmental instructions, generally one or two hearings are granted.

• Adjournment: If you are unable to attend the scheduled hearing, you must formally request an adjournment in writing with valid reasons, keeping in mind that usually only one adjournment is granted at the discretion of the authority.

Conclusion

A hearing is more than a procedural step under GST. It is a mutual benefit mechanism that supports balanced decision-making, protects taxpayer rights, and promotes efficient tax administration. Ensuring a fair hearing culture strengthens trust and cooperation between taxpayers and authorities, which is essential for the long-term success of the GST system.

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.