Eveready Industries India Ltd. Lko. ... vs State Of U.P. Thru. Secy. Ministry ... on 31 May, 2024

Here's a summary of the judgment:

1. Outcome
The High Court allowed the writ petition, quashing the impugned assessment order dated 19.02.2024 (FORM GST DRC-07) and the rectification order dated 27.04.2024 (FORM GST DRC-08). The matter was remitted back to the proper officer with a direction to provide an opportunity for personal hearing to the petitioner before passing a fresh order in accordance with statutory provisions.

2. Core Issue
The core issue was whether an opportunity of "personal" hearing is mandatory under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act, 2017) in assessment proceedings under Section 74, especially when an adverse decision is contemplated and a request for personal hearing is made by the taxpayer, even if the show cause notice marked 'NA' for hearing.

3. Key Facts
* Eveready Industries India Ltd. (petitioner) was issued audit notices (FORM GST ADT-01) on 05.05.2022 and 05.01.2023. A survey was conducted on 11.05.2022.
* The petitioner claimed compliance but no audit report (FORM GST ADT-02) was issued, nor was any information regarding the audit outcome provided.
* A show cause notice (SCN) under Section 74 (FORM GST DRC-01) was issued on 007.08.2023, relying on the audit notices.
* The SCN explicitly stated "NA" (not applicable) in the columns for date, place, and time of hearing, effectively denying an opportunity for personal hearing.
* The petitioner submitted a reply to the SCN on 06.11.2023, specifically praying for a personal hearing.
* Despite the request, the impugned assessment order and subsequent rectification order were passed without granting a personal hearing.

4. Arguments

• Taxpayer (Eveready Industries India Ltd.):

  • The impugned orders were passed in violation of natural justice principles, specifically denying a mandatory personal hearing.
  • Section 75(4) of the UPGST Act, 2017, mandates an opportunity of hearing where a request is received in writing or where an adverse decision is contemplated.
  • The SCN itself, by marking 'NA' for hearing, denied this statutory right.
  • The petitioner had specifically requested a personal hearing in its written reply.
  • Relied on three coordinate bench judgments (Bharat Mint & Allied Chemicals, Mohini Traders, M/s Mahendra Educational Pvt. Ltd.) which established that personal hearing is mandatory under Section 75(4).
  • Section 75, titled "General provisions relating to determination of tax," applies broadly to all tax determination proceedings under Sections 73 and 74, not just post-remand cases. Interpreting it otherwise would render parts of Section 75 otiose, particularly Section 75(5) which refers to adjourning hearings.

• Revenue (State of U.P.):

  • The petitioner has an efficacious alternative remedy of appeal under Section 107 of the UPGST Act, 2017.
  • Section 74(9) of the Act only requires the proper officer to consider "the representation, if any," made by the person chargeable with tax, and does not explicitly mandate a "personal" hearing.
  • Section 75, specifically sub-sections (1), (2), (3), (8), and (11), mainly deals with procedures to be followed by the proper officer after a remand from an appellate authority or court, suggesting that Section 75(4) should also be read in that context, not as a general pre-adjudication mandate.

5. Court’s Reasoning
The High Court considered the arguments and various principles of statutory interpretation:
* Mandatory Personal Hearing: The Court found itself in respectful agreement with its three coordinate bench decisions which held that an opportunity of personal hearing is mandatory under Section 75(4) of the Act, particularly when requested or when an adverse decision is contemplated.
* Interpretation of Section 75: The Court rejected the Revenue’s narrow interpretation of Section 75. While some sub-sections of Section 75 (like (1), (2), (3), (8), (11)) pertain to post-remand proceedings, other sub-sections (4), (5), (6), (7), (9), (10) clearly apply to the initial adjudication process.
* The sub-heading of Section 75 – "General provisions relating to determination of tax" – supports its broad application to all tax determination processes.
* Section 75(5), which allows the proper officer to "adjourn the hearing" for reasons recorded in writing (up to three times), strongly implies the existence of a "personal" or oral hearing, as an adjournment is relevant only when a hearing is ongoing or scheduled. Granting time for a written reply is distinct from adjourning a hearing.
* Statutory Interpretation Principles: The Court applied several established principles:
* The golden rule of construction (grammatical and ordinary sense of words, unless leading to absurdity).
* The principle that a casus omissus cannot be supplied by the Court unless there is a clear necessity found within the statute itself.
* The necessity of reading all sections of a statute together to ensure consistency and avoid rendering any part otiose.
* The rule that ambiguity in a taxing statute should be resolved in favor of the assessee.
* The observation that if a literal construction leads to absurdity or anomaly, the Court can explain the true intention of the legislation.
* Conclusion on "Personal" Hearing: Based on a holistic reading of Sections 73, 74, and 75, and especially considering the implications of Section 75(5), the Court held that the word "personal" can be construed as implicitly intended by the legislature in Section 75(4), even if explicitly omitted. To hold otherwise would lead to an anomalous situation and render Section 75(5) meaningless.
* Alternative Remedy: The Court reiterated that the availability of an alternative remedy is not an absolute bar to a writ petition under Article 226, especially in cases where there is a total violation of the principles of natural justice.

6. Statutory References
* Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act, 2017):
* Section 65(4) (Completion of audit)
* Section 73 (Determination of tax without fraud)
* Section 74(1), (9) (Determination of tax with fraud, willful misstatement, or suppression of facts)
* Section 75(1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) (General provisions relating to determination of tax)
* Section 107 (Appeals)
* Section 50 (Interest on delayed payments)
* The Constitution of India:
* Article 226 (Writ Jurisdiction)
* Imports and Exports (Control) Act, 1947:
* Section 4M(1), 3rd proviso (Cited by Revenue, distinguished by Court)

7. Precedents Cited
* By Taxpayer (Affirmed by Court):
* Bharat Mint & Allied Chemicals Vs. Commissioner, Commercial Tax & others, Writ- Tax No.1029 of 2021, (2022) Vol.48 VLJ 325.
* M/s Mohini Traders Vs. State of U.P. and another, Writ Tax No.551 of 2023.
* M/s Mahendra Educational Pvt. Ltd. Vs. State of U.P., Writ Tax No.44 of 2024.
* By Revenue (Distinguished by Court):
* Union of India and Others Vs. M/s.Jesus Sales Corporation, AIR 1996 SC 1509.
* By Court (Principles of Statutory Interpretation):
* Grey versus Pearson, (1857) 6 HL cases 61.
* Abley v Dale, 11, CB 378.
* M/s Trutuf Safety Glass Industries versus Commissioner of Sales Tax, UP, 2007 (7) SCC 242.
* Commissioner of Sales Tax versus Parson Tools and Plants, 1975 (4) SCC 22.
* Godrej and Boyce Manufacturing Company Limited Vs Deputy Commissioner of I.T., Mumbai and another, 2017 (7) SCC 421.
* Pearl Berg versus Varty, (1972) 2 All ER 6.
* Padmasundara Rao (dead) and others Vs State of Tamil Nadu and others, AIR 2002 Supreme Court 1334.
* Institute of Chartered Accountants of India versus M/s Price Waterhouse and another, AIR 1998 Supreme Court 74.
* D.R. Venkatachalam and others, etc Vs. Deputy Transport Commissioner and others, AIR 1977 Supreme Court 842.
* Bharat Aluminium Company vs Kaiser Aluminium Technical Services Inc., 2012 (9) SCC 552.
* Duport Steels Ltd Vs. Sirs, 1980, All ER 529 (HL).
* Canada Sugar Refining Company Limited versus The Queen (Canada), 1898 AC 735.
* Commissioner of Customs (Import), Mumbai Versus Dilip Kumar and Company and others, 2018 (9) SCC 1.