In a recent ruling, the Allahabad High Court has quashed the Goods and Services Tax ( GST ) demand of Rs. 2.11 crores which was issued under Section 74 of the Central Goods and Services Tax ( CGST Act ), 2017 on grounds of lack of personal hearing. The matter was remanded for fresh hearing. The case centered on a demand raised under Section 74 of the GST Act, following an alleged wrongful availing of Input Tax Credit ( ITC ) by the petitioner, M/s Integra Micro Systems Private Limited, which the company claimed was a bona fide mistake and had already been corrected in subsequent returns.

Despite the correction, the authorities issued a show-cause notice on June 21, 2022, proposing the hefty tax liability. The petitioner sought an adjournment and requested a personal hearing, citing the unavailability of their advocate. However, subsequent reminder notices issued by the department failed to specify any date, time, or venue for a personal hearing, instead merely marking these columns as “NA.” Ultimately, an order was passed on March 25, 2023, confirming the demand without granting the petitioner an opportunity to be heard. Worried About SME IPO Pitfalls?

Gain Clarity with This Advanced Course! Register Now The petitioner’s appeal against this order was dismissed on December 4, 2024, on the grounds of being filed beyond the limitation period. Challenging both the original and appellate orders, the petitioner argued that the denial of a personal hearing was contrary to Section 75(4) of the GST Act, which mandates an opportunity of hearing before passing any adverse order. Justice Pankaj Bhatia observed that “Section 75(4) of the GST Act mandates the granting of an opportunity of hearing where an adverse decision is contemplated against a person. This provision was also interpreted by this Court in the case of Party Time Hospitality Prop. Smt. Punita Gupta Lko. v. State Of U.P. & 2 Others (Writ Tax No.176 of 2023) decided on 28.08.2023 and the Court was of the view that compliance of Section 75(4) of GST Act is mandatory; while doing so, this Court had also considered the earlier judgments of this Court.”

Considering the fact that the original order is contrary to the mandate of Section 75(4) of GST Act and is also violative of principles of natural justice, the order dated 25.03.2023 was quashed by the bench. However, the matter was remanded back to the concerned authorities to pass fresh orders after giving an opportunity of hearing and after permitting the petitioner to file a reply to the show-cause notice, in accordance with law.