High Court Strikes Down Section 73 Order for Breach of Natural Justice
High Court Strikes Down Section 73 Order for Breach of Natural Justice
The writ petition arose out of proceedings initiated under Section 73 of the GST Act relating to the financial year 2018-19. A show cause notice was issued on 28.12.2023, even though the registration of the petitioner had already been cancelled with effect from 01.01.2023.
The adjudicating authority thereafter proceeded to pass the order dated 11.03.2024, confirming the demand without ensuring that the petitioner had any effective access to the portal or opportunity to put forward its defence. It was contended before the Court that once the registration stood cancelled, the petitioner could not have responded to the notices and consequently the proceedings culminated in an ex parte order. The further grievance was that the statutory appeal filed under Section 107 was dismissed on the ground of delay of 49 days, leaving no avenue for consideration on merits. The limited challenge before the Court was that the order passed under Section 73 was vitiated for breach of statutory mandate under Section 75(4) of the GST Act, 2017, which requires a reasonable opportunity of hearing before passing an order adverse to an assessee.
Main Issue: Whether the direction dated 11.03.2024 under Section 73 for FY 2018-19 could be maintained when no chance of hearing under Section 75(4) was given.
HC Held: The Court held that the order issued under Section 73 on 11.03.2024 was not sustainable in law because it contravened Section 75(4). As per the court, it is an absolute requirement of the statute to give an opportunity of hearing, and the omission to give such a hearing prior to issuing a negative order makes the adjudication nugatory. The Court observed that the registration had itself been cancelled on 01.01.2023, and after the show cause notice was issued later, the petitioner was practically disabled from responding or joining in the proceedings. In such a situation, the denial of hearing was a clear breach of statutory duty as well as the principles of natural justice. The Court emphasised that the provision under Section 75(4) is not a mere formality but a substantive safeguard which goes to the root of the adjudication process.
Therefore, the order confirming demand under Section 73 for the accounting year 2018-19 was set aside and quashed. The case was referred to the adjudicating authority with a direction to go on afresh in terms of law and only after granting proper opportunity of hearing as required under Section 75(4). The Court made it clear that it had not formed any opinion regarding the merits of the case and all questions of fact and law are still open to adjudication in the fresh proceedings. The writ petition was granted, the rule was made absolute, and there was no order as to costs.
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