UPGST Section 75(4): Allahabad HC Mandates Hearing Opportunity Before Imposing Penalty

The Lucknow Bench of the Allahabad High Court held that before passing any adverse order, such as imposing tax or penalty, the opportunity of hearing is mandatory under Section 75(4) of the Uttar Pradesh Goods and Service Tax Act, 2017.

Section 75(4) of the UPGST Act provides that an opportunity for a hearing must be granted if requested in writing or where any adverse action is contemplated against such a person.

Petitioner was issued show cause notices asking it to show cause as to why tax and penalty should not be imposed upon it. The petitioner submitted a reply to the show cause notice, however, mistakenly marked “NO” for the opportunity of hearing. Thereafter, orders were passed imposing tax and penalty on the petitioner.

Counsel for the petitioner submitted that this error was due to some technical glitch/mistake on the portal. It was argued that Section 75(4) mandates that an opportunity for a hearing be provided to the petitioner. It was also argued that the orders were passed a day before the date fixed. Reliance was placed on the judgment of the Allahabad High Court in M/s. Mohini Traders vs. State of U.P. and another and Bharat Mint & Allied Chemicals Vs. Commissioner, Commercial Tax & others.

The Court observed that Section 75(4) of the UPGST Act specifically states ‘or where any adverse decision is contemplated against such person’.

The bench comprising Justice Vivek Chaudhary and Justice Om Prakash Shukla held

“Since in the present cases, both tax and penalty are imposed against the petitioners and admittedly, an adverse decision is contemplated against the petitioners, therefore, under Section 75(4) of the Act of 2017, an opportunity of hearing was mandatorily required to be given by the department to the petitioners and merely marking the same as “NO” in the option cannot entitle the department to pass an order without giving any opportunity or even without waiting for the petitioners to appear on the date fixed.”

The Court held that a similar view had been taken by a coordinate bench in M/s. Mohini Traders vs. State of U.P. and another.

Accordingly, the orders were quashed with the liberty of the department to proceed afresh from the stage of providing the opportunity of hearing to the petitioner.