Principles of Natural Justice Under GST Laws

The Principle of Natural justice are the basic parameter used in the interpretation of adjudicating process in judicial including quasi judicial as well as administrative process. Natural Justice implies that the judgment or decision should be just, right, fair, substantial, as per the provisions of statutes. The principles of Natural justice are based on the following essential elements:

1. ‘Audi alteram partem’, both sides shall be heard in person presence before the pass of decision.
2. ‘Nemo judex in causa sua’, the authority passing the orders should be free from bias & prejudice.
3. No man should judge his own case. This implies that affected party cannot be adjudicating authority for his own case.
4. The parties to a proceedings must have due notice of when the Court will be proceeded in the subject matter.
5. The hearing notice should be adequate and must contain time, place and nature of hearing.
6. The Court must act honestly and impartially and not under the dictation of other persons.
7. No ex-parte order should be passed without giving sufficient opportunities to both the parties personally present and being heard in person.
8. The affected parties should eligible to know the reasons for the decision passed by the court.
9. The affected parties should have right to scrutinize the documentary evidence collected against him.

The above cited elements are only guiding principles of Natural Justice but applicability of these principles are depends upon the prime factor, circumstances, facts of the each case.

Statutory provisions under GST Laws:

Section 75 of the CGST Act, 2017 prescribed for general provisions relating to determination of tax and sub-section (4) of Section 75 of the Act, provides that “An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person”.

Section 28 of the CGST Act,2017 prescribed amendment of registration and second proviso to Section 28 of the Act, provides ” Provided further that the proper officer shall not reject the application for amendment in the registration particulars without giving the person an opportunity of being heard.”

Similarly , Section 29 of the CGST Act, 2017 prescribed Cancellation / Suspension of registration and Section 30(2) of the CGST Act,2017 prescribed revocation of cancellation of registration and proviso to the said Acts, provides that “provided that the proper officer shall not be cancel the registration without giving the person an opportunity of being heard and provided that the application for revocation of cancellation of registration shall not be rejected unless the applicant has been given an opportunity of being heard.”

Section 161 of the CGST Act, 2017 prescribed for Rectification of errors apparent on the face of record and third proviso provides that :

“Provided that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification.”

Section 54 of the CGST Act, 2017 prescribed for Refund of tax and sub-section (11) provides that:

“(11) Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.”

Section 63 of the CGST Act, 2017 prescribed assessment of unregistered person and proviso provides that “no such assessment order shall be passed without giving the person an opportunity of being heard.”

Section 97 and Section 98 of the CGST Act, 2017-Application for advance ruling / procedures, where in sub-section of (4) of Section 98 of the Act, prescribed that:

(4) Where an application is admitted under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority and after providing an opportunity of being heard to the applicant or his authorised representative as well as to the concerned officer or his authorised representative, pronounce its advance ruling on the question specified in the application.

Section 101 of the CGST Act, 2017 – Orders of Appellate Authority and sub-section (1) of the Act, provides that:

“(1) The Appellate Authority may, after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to.”

Section 113 of the CGST Act, 2017 – Orders of Appellate Tribunal- proviso to sub-section (3) of the Section 113 provides that:

“Provided that no amendment which has the effect of enhancing an assessment or reducing a refund or input tax credit or otherwise increasing the liability of the other party, shall be made under this sub-section, unless the party has been given an opportunity of being heard.”

The cited statutory provisions are very clear and mandatory that no adverse decision shall be pass against a person without giving an opportunity of hearing to such person, where any adverse decision is passed against such person. Hence, no order should be passed without giving an opportunity of hearing to the petitioner is illegal and violation of principles of natural justice.

Constitution of India:

The constitution of India has laid down foundation stone in Articles 14, 19 and 21 to safeguards the human rights & personal liberties. In the landmark Apex court judgment in famous case of Maneka Gandhi v. Union of India reported in AIR 1978 SC 597, the Hon’ble Supreme Court discussed the increasing importance of Natural Justice and observed that Natural Justice is a great humanizing principle intended to invest law with fairness and to secure Justice and further held that law which allows any administrative authority to take a decision affecting the rights of the people, without assigning the reasons for such action, cannot be accepted as a procedure, which is just, fair and reasonable, hence violation of Articles 14, 19 & 21 of the Constitution of India.

Relevant Judicial pronouncements:

(i) The Hon’ble High Court of Karnataka in the case of M/s. Kalbudde Logistics v. Commercial Tax Officer, reported in 2021 (48) G.S.T.L. 238 (Kar.) held that

“From the perusal of the Annexure-B, the second respondent without providing an opportunity to the petitioner has passed the impugned order. Thus, impugned order passed by the second respondent is in contravention of principles of natural justice. Hence, the impugned orders deserves to be set aside only on the ground of violation of principles of natural justice. Accordingly, writ petition is allowed, the impugned order is hereby set aside. The matter is remitted to the second respondent to reconsider the appeal afresh after hearing the parties and pass appropriate order in accordance with law.”

(ii) The Hon’ble High Court Patna in the case of Shiv Kishor Constrcution Pvt. Ltd. v. Union of India reported in 2020 (40) G.S.T.L. 443 (Pat.) held that Impugned order dated 2nd of March, 2020 is passed by the Deputy Commissioner of State Tax, Patna Central Circle, Bihar, Patna who issued a notice asking the petitioner to show cause by a particular date. However, for unexplained reasons and circumstances, without any prior intimation or knowledge, the matter was preponed and without affording any opportunity of hearing, decided, holding the view of the Revenue. The order does entail civil and pecuniary consequences, causing prejudice to the petitioner. On all fours, principles of natural justice stand violated.”

(iii) The Hon’ble High Court of Gujarat in the case of Alkem Laboratories Ltd. v. Union of India, reported in 2021 (46) G.S.T.L. 113 (Guj.) held that

“the impugned order passed by the respondent No. 2, dated 21st October, 2020, Annexure-A to this writ application is quashed and set aside. As the main order has been quashed and set aside, the order of attachment dated 17th December, 2020 also stands quashed and set aside. The entire matter is remitted to the respondent No. 2 for fresh consideration. The respondent No. 2 shall issue a notice to the writ applicant, fixing a particular date for hearing, and on that particular date, that may be fixed, the writ applicant himself or through his legal representative shall appear before the respondent No. 2 and make his submissions. The respondent No. 2 shall, thereafter, proceed to pass the final order in accordance with law. We clarify that we have otherwise not gone into the merits of the matter. We have only addressed ourselves on the question whether the impugned order should be quashed on the ground that no opportunity of hearing was given to the writ applicant. The writ application stands disposed of accordingly.”

(iv) The Hon’ble High Court of Orissa in the case of Arati Behera v. State Tax Officer, CT & GST, reported in (2023) 9 Centax 80 (Ori.) = 2023 (76) G.S.T.L. 337 (Ori.) held that

“In view of such position, this Court has no hesitation to hold that the opposite parties have shown haste in passing the order dated 24.05.2023 under Annexure-4, though the adjudicating authority had to give opportunity of hearing to the petitioner in conformity with the provisions of law. In absence of compliance of such provision, the order so passed on 24.05.2023 under Annexure-4 cannot be sustained in the eye of law and liable to be quashed and is hereby quashed. The matter is remitted back to the adjudicating authority to pass appropriate order under section 73 of the Act by affording opportunity of hearing to the petitioner.” (v) The Hon’ble High Court of Orissa in the case of Kaypan Sugandh Pvt. Ltd. v. Commissioner of Cex Cus & S.T. Rourkela-reported in 2017 (7) G.S.T.L. 276 (Ori.), held that

“authorities should have allowed cross-examination of two witnesses to test veracity of their statements – Statements of witnesses whom assessee wanted to cross-examine, formed basis of show cause notice – In not allowing cross-examination principles of natural justice were violated – Matter remanded with direction that adjudicating authority to give opportunity to assessee to cross-examine witnesses without expressing anything on merits of case”

(vi) The High Court of Allahabad in the case of M/s Jai Vindhya Udyog v. State of U.P., reported in (2023) 12 Centax 105 (All.), held that

(vii) The Hon’ble High Court of Gujarat in the case of M/s Daksh Enterprise v. Commissioner of State Tax, reported in (2023) 11 Centax 347(Guj.) = 2023 (79) G.S.T.L. 47 (Guj.), held that

“Where in response to SCN, assessee filed reply a day prior to last date fixed, but impugned demand order was passed without considering same, there was violation of principles of natural justice and non consideration of reply so filed. Matter is remanded for fresh adjudication after giving personal hearing to the petitioner from the stage of DRC-01.”

(viii) The Hon’ble High Court Gujarat in the case of M/s Daksh Enterprise v. Commissioner State Tax, reported in 2023 (11) Centax 347(Guj.) = 2023 (79) G.S.T.L. 47 (Guj.), held that

“Where in response to SCN, assessee filed reply a day prior to last date fixed, but impugned demand order was passed without considering same, there was violation of principles of natural justice.

(ix) The Hon’ble High Court of Allahabad in the case of M/s Jai Vendhya Udyog , reported in 2023 (12) Centax 105 (All.), held that “Where order was passed by revenue authorities without providing opportunity of hearing to assessee concerned, same being violative of principles of natural justice was liable to be quashed.”

Conclusion: Thus, the adjudicating authority or appellate authority should be free from narrow and restricted consideration while passing decision or ex parte order against the taxpayer. The statutory provisions under Section 75(4) of the CGST Act, 2017 and other CGST Acts as stated (supra) are provides right of personal hearing under GST Laws. Thus, the adjudicating authority or appellate authority shall, in any proceedings under CGST Act or any other provision of the CGST Act, give an opportunity of being heard to a party in a proceeding, if the party so desires, which is the basic fundamental principle of natural justice is an inherent in provision of GST statutes. The principles Natural Justice are widely accepted by the Courts and judiciary for the restoration of the Natural Justice in case of violation. The Role of High Courts and Apex Court are to restore Natural Justice when there is breach of Principles of Natural Justice under GST laws.