Assessment order quashed as denial of personal hearing violated principles of natural justice despite availability of alternate appellate remedy

Case Reference

• Case Title: M/s Mahendra Sponge and Power Limited v. Assistant Commissioner State Tax (SGST)

• Court: High Court of Chhattisgarh, Bilaspur

• Petition No.: WA No. 267 of 2022 (arising from WPT No. 67 of 2022)

• Category: Natural Justice – Right to Personal Hearing

• Date of Judgment: 09.01.2023

• Relevant Sections: Section 61, Section 73(9), Section 75(4), Section 107 of CGST/SGST Act, 2017; Rule 142(1) of CGST Rules, 2017

Facts (Paras 2–6)

The appellant, M/s Mahendra Sponge and Power Ltd., challenged the adjudication order dated 02.02.2022 before the Single Judge, contending that no proper show cause notice or personal hearing was granted. A notice under Section 61 in Form ASMT-10 was issued on 11.08.2021, followed by DRC-01 dated 11.10.2021, treated as a summary of demand. The appellant, by letters dated 20.08.2021 and 30.10.2021, specifically sought a personal hearing under Section 75(4). However, the authority proceeded to determine tax, interest, and penalty under Section 73(9) without granting such hearing. The Single Judge dismissed the writ on 04.05.2022, holding that an appeal remedy under Section 107 was available.

Questions for Consideration

1. Whether the writ petition could be dismissed solely on grounds of availability of alternate remedy under Section 107?

2. Whether denial of personal hearing, despite specific request, amounted to violation of Section 75(4) and principles of natural justice?

3. Whether the DRC-01 issued constituted a valid show cause notice under Section 73?

Observations (Paras 4–8)

The Division Bench noted that the appellant had made specific written requests for personal hearing as mandated under Section 75(4). Even if no reply to the notice was filed, the authority was obliged to grant hearing once requested. The Court also found force in the contention that DRC-01 is merely a summary under Rule 142(1) and not a substitute for a detailed show cause notice. The Single Judge had overlooked this statutory safeguard.

Importantly, the Court reiterated that while alternate remedy under Section 107 exists, it is not an absolute bar when fundamental procedural safeguards under natural justice are breached. The denial of personal hearing therefore justified judicial interference under Article 226.

Judgment / Verdict (Paras 8–13)

The Division Bench set aside the Single Judge’s order dated 04.05.2022 as well as the adjudication order dated 02.02.2022. It directed the authority to issue fresh notice within 10 days, fix a date of personal hearing, and pass a reasoned order within 45 days thereafter. Till such order is passed, the balance recovery was stayed. The appellant was allowed to press its argument that DRC-01 cannot be treated as a valid show cause notice.

Table of Cases Referred

Between Fine Lines

For businesses, this judgment clarifies that GST authorities must mandatorily provide personal hearing if requested under Section 75(4). Even where an appellate remedy is available, denial of such hearing renders the order vulnerable. Dealers can rely on this ruling to challenge assessments passed mechanically on summary notices (DRC-01) without proper opportunity of defence.

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