In Writ Tax No. 176 of 2023 -ALL HC- Allahabad High Court sets aside GST department’s order for violating principles of natural justice
Justice Pankaj Bhatia [28-08-2023]

Read Order: Party Time Hospitality Prop. Smt. Punita Gupta Lko v. State of U.P. Thru Prin. Secy. Tax and Registration Lko and 2 Others

Chahat Varma

New Delhi, September 13, 2023: The Allahabad High Court has remanded a matter back to the GST department for providing an opportunity of hearing to Party Time Hospitality (petitioner) who had been issued a show-cause notice under Section 74 of the Goods and Services Tax Act (GST Act).

The petitioner had filed the present petition to challenge two orders. The first order confirmed the demand against the petitioner under Section 74 of the GST Act. The second order dismissed the appeal filed by the petitioner.

According to the petitioner, they took possession of a party lawn through a lease deed executed on August 1, 2018, and they claimed not to have been involved in the affairs of the party lawn before that date. Subsequently, a show-cause notice was issued to them Section 74 of the GST Act. The petitioner's contention was that the show-cause notice did not clearly explain how Section 74 of the GST Act could be invoked. Furthermore, while the show-cause notice mentioned the amount the petitioner was required to pay, it did not specify the date, time, or venue for a personal hearing.

The single-judge bench of Justice Pankaj Bhatia noted that the department initiated the show-cause notice, based on a survey that revealed that the required taxes had not been deposited. However, the summary of the show-cause notice, did not clearly indicate or specify what aspect of fraud, misrepresentation, or wilful misstatement was being alleged against the petitioner.

The bench stated that the order of assessment, which was issued in response to the show-cause notice issued under Section 74 of the GST Act, did not provide the petitioner with an opportunity for a hearing. This was found to be in direct violation of the legal requirement specified in Section 75(4) of the GST Act. Furthermore, the bench held that even in cases involving expropriatory actions, the principles of natural justice must be adhered to.

Thus, the court decided to remand the matter back to the department for providing the petitioner with an opportunity of hearing and passing a fresh order in accordance with the law.