An Opportunity for Personal Hearing Must Be Granted Before an Adverse Decision
By: Admin | Date: February 13, 2025 | Category: Important Pronouncements | Read Time: 4 Min
Key Takeaways
✅ The Andhra Pradesh High Court ruled that authorities must grant a personal hearing before issuing an adverse decision, even if the taxpayer does not explicitly request it.
✅ Section 63 of the CGST Act allows assessment of unregistered persons without prior authorization.
✅ Section 75(5) does not mandate a minimum of three adjournments before passing an order.
High Court Judgment: Sri Srinivasa Lorry Transport v. Assistant Commissioner ST
In the case of Sri Srinivasa Lorry Transport v. Assistant Commissioner ST [W.P. Nos. 5385 & 5456 of 2021, dated September 11, 2024], the Andhra Pradesh High Court overturned the assessment and penalty orders. The court emphasized:
✅ Authorities must provide a personal hearing before issuing an adverse decision.
✅ Section 63 does not require prior authorization for assessing unregistered persons.
✅ Section 75(5) does not establish a mandatory minimum of three adjournments.
Case Background
Sri Srinivasa Lorry Transport, a lorry transport business, faced an inspection on November 7, 2019, conducted by the Assistant Commissioner (ST). At that time, the business had not registered under the Andhra Pradesh Goods and Services Tax Act, 2017 (APGST Act) or the CGST Act, 2017.
Following the inspection:
➡️ The department issued a Show-Cause Notice on December 17, 2019, which the petitioner received on December 26, 2019.
➡️ The petitioner requested time to file objections but did not receive a personal hearing.
➡️ The authorities passed the Assessment Order on September 21, 2020, followed by the Penalty Order on November 9, 2020.
➡️ The petitioner submitted objections in October 2020, after the orders had already been issued.
➡️ The petitioner then challenged these decisions in the High Court.
Key Legal Issues Addressed
1️⃣ Does Section 63 require prior authorization for assessing unregistered persons?
2️⃣ Must tax authorities allow at least three adjournments under Section 75 before passing an order?
3️⃣ Should a personal hearing be granted, even if not explicitly requested?
Court’s Observations & Ruling
1️⃣ No Prior Authorization Needed Under Section 63
Section 67 mandates prior authorization for inspections or audits. However, Section 63 applies to the assessment of unregistered persons and does not require such authorization. The assessing officer had territorial jurisdiction, making the order legally valid.
2️⃣ Three Adjournments Not Mandatory Under Section 75
Section 75(4) obligates tax authorities to grant a hearing before making an adverse decision. However, Section 75(5) only restricts the number of adjournments to three; it does not mandate a minimum of three adjournments.
3️⃣ Personal Hearing Is Essential Before an Adverse Decision
The court emphasized that natural justice principles require authorities to offer a personal hearing before issuing an adverse decision. Even if a taxpayer does not explicitly request one, the authorities must ensure due process. As a result, the court set aside the impugned orders and directed a fresh assessment after granting a personal hearing.
Legal Provisions Explained
📌 Section 63 – Assessment of Unregistered Persons
✔ Allows tax authorities to assess unregistered persons liable for GST registration.
✔ Requires assessments to be completed within five years.
✔ Mandates an opportunity for a hearing before passing an order.
📌 Section 75 – General Provisions for Tax Determination
✔ Section 75(4): Personal hearings are mandatory if requested or if an adverse decision is anticipated.
✔ Section 75(5): Adjournments are limited to three, but a minimum is not required.
📌 Section 67 – Power of Inspection, Search & Seizure
✔ Requires authorization from the Joint Commissioner or Commissioner before inspecting a taxpayer’s premises.
Conclusion
The High Court’s ruling reinforces the fundamental principles of natural justice, ensuring taxpayers receive a personal hearing before facing an adverse decision. Additionally, it clarifies that:
✅ Section 63 does not require prior authorization for assessing unregistered persons.
✅ Section 75(5) does not mandate three adjournments before passing an order.
✅ Authorities must offer a hearing to ensure fair assessment and compliance with due process.
