M/S Ijm Concrete Products Pvt. Ltd. ... vs The State Of Madhya Pradesh on 22 January, 2024

Outcome**
The High Court set aside the impugned summary orders in FORM GST DRC-07, consequent to the assessment orders dated 26/07/2022, and all proceedings subsequent to the petitioner's reply to the show cause notices in both writ petitions. The respondents were directed to provide a fresh opportunity of personal hearing to the petitioners, which must be conducted by an officer other than the one who issued the original show cause notice. The court explicitly stated that it did not express any opinion on the merits of the case.

2. Core Issue
The core issue was whether an opportunity of personal hearing is mandatory under Section 75(4) of the CGST/MPGST Act, 2017, especially when an adverse decision is contemplated against a taxpayer, and if the absence of such an opportunity violates the principles of natural justice and vitiates the assessment proceedings/orders. A secondary issue raised by the petitioner was the non-issuance of intimation in FORM DRC-01A prior to the show cause notice in FORM DRC-01.

3. Key Facts
* The petitioner, M/S IJM Concrete Products Pvt. Ltd., challenged summary orders in FORM GST DRC-07, issued consequent to assessment orders dated 26/07/2022, passed under Section 73(1) of the MPGST Act, 2017.
* The assessment pertained to the period from 01/04/2020 to 31/03/2021.
* A demand for excess Input Tax Credit (ITC) of Rs. 20,94,812/- (inclusive of CGST, IGST, SGST, interest, and penalty) was raised against the petitioner.
* The petitioner contended that the orders were passed ex-parte, without providing an opportunity of personal hearing, in violation of Section 75(4) and Section 73(9) of the Act and the principles of natural justice (Audi Alteram Partem).
* The petitioner also alleged violation of Rule 142(1A) of the CGST Rules, 2017, for not issuing intimation in FORM DRC-01A before the show cause notice in FORM DRC-01.
* The show cause notice (DRC-01) was issued on 10/06/2022.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Petitioner) Arguments:

  • The assessment orders were passed ex-parte, without affording an opportunity of personal hearing, thus violating Section 75(4) of the Act and the principles of natural justice.
  • Section 75(4) mandates an opportunity of hearing where an adverse decision is contemplated, regardless of whether a specific request for it was made, due to the crucial use of the word "or".
  • Section 73(9) requires the proper officer to consider the assessee's representation before passing an order, implying a need for fair hearing.
  • The proceedings were also invalid due to non-adherence to Rule 142(1A) of the CGST Rules, 2017, which requires issuing FORM DRC-01A prior to FORM DRC-01.
  • Relied on Ultratech Cement v. State of Madhya Pradesh, Ravi Enterprises v. Commissioner of State Tax, Tanishka International v. State of U.P, Ultratech Cement Ltd. Vs. Union of India, Graziano Trasmissioni India Pvt. Ltd. Vs. State of Gujarat, and M/s. BL Pahariya Medical Store Vs. State of U.P. And another.

• Revenue (Respondent) Arguments:

  • Section 75(4) refers to "opportunity of hearing," not specifically "personal hearing."
  • The petitioner did not opt for a personal hearing after receiving the show cause notice (FORM DRC-01), hence no fault can be attributed to the respondents.
  • Relied on Union of India and Another vs. Jesus Sales Corporation.

5. Court’s Reasoning
* Interpretation of Section 75(4): The court held that a plain reading of Section 75(4) makes it clear that an "opportunity of hearing" must be granted in two situations: (a) when a specific request is received in writing from the person chargeable with tax/penalty, OR (b) where any adverse decision is contemplated against such person. The word "or" is crucial, making the provision mandatory even if no explicit request for a hearing is made, provided an adverse decision is foreseen.
* Meaning of 'Opportunity of Hearing': The court rejected the State's argument that 'opportunity of hearing' does not include 'personal hearing'. It noted that statutory forms themselves visualize different stages for submitting replies and for personal hearing, indicating that personal hearing is an integral part of a complete opportunity of hearing.
* Violation of Natural Justice: The court concluded that since an adverse decision was contemplated against the petitioners, it was obligatory and mandatory for the respondents to provide an opportunity of personal hearing. The admitted failure to do so vitiated the decision-making process, running contrary to the principles of natural justice and the statutory requirement of Section 75(4) of the GST Act.
* Precedential Support: The court found support in the Division Bench judgments of the Allahabad High Court (M/s. BL Pahariya Medical Store) and the Gujarat High Court (Graziano Trasmissioni India Pvt. Ltd.).
* Impartiality: Citing Ultratech Cement Ltd. Vs. Union of India, the court directed that the fresh opportunity of hearing be provided by an officer other than the one who had issued the show cause notice.
* The court did not explicitly rule on the non-issuance of FORM DRC-01A, focusing its decision entirely on the violation of Section 75(4) regarding personal hearing.

6. Statutory References
* Constitution of India, 1950 - Article 226
* Madhya Pradesh Goods & Service Tax Act, 2017 (MPGST Act)
* Section 73(1)
* Section 73(5)
* Section 73(9)
* Section 75(4)
* Central Goods and Service Tax Act, 2017 (CGST Act) - Referenced generally alongside MPGST Act for parallel provisions.
* Central Goods and Services Rules, 2017 (CGST Rules)
* Rule 142(1A)
* FORM DRC-01
* FORM DRC-01A
* FORM GST DRC-07

7. Precedents Cited
* Ultratech Cement v. State of Madhya Pradesh (Order dated 19.01.2023 passed in W.P. No. 617/2023)
* Ravi Enterprises v. Commissioner of State Tax [2023] 148 taxmann.com 5 (Uttarakhand)
* Tanishka International v. State of U.P [2023] 148 taxmann.com 345 (Allahabad)
* Ultratech Cement Ltd. Vs. Union of India (2023) 4 Centax 198 (M.P.) (19.01.2023)
* Graziano Trasmissioni India Pvt. Ltd. Vs. State of Gujarat 2022 (66) G.S.T.L. 38 (Guj.) (23.06.2022)
* M/s. BL Pahariya Medical Store Vs. State of U.P. And another 2023 (8) TMI 1091, Allahabad High Court
* Nelson Motis Vs. Union of India (1992) 4 SCC 711
* Union of India and Another vs. Jesus Sales Corporation (1996) 4 SCC 69