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 assessment proceedings (including the summary order in Form GST DRC-07) after the stage of the reply to show cause notices in both writ petitions. The respondents were directed to provide an opportunity of personal hearing to the petitioners by a different officer than the one who issued the show cause notice, without expressing any opinion on the merits of the case.

2. Core Issue
The core issue was whether the GST authorities are mandatorily required to provide an opportunity of personal hearing to the taxpayer, even if not specifically requested, when an adverse decision contemplating a demand for tax, interest, and penalty is intended, as per Section 75(4) of the CGST/MPGST Act, and whether the failure to issue FORM DRC-01A before FORM DRC-01 vitiates the proceedings.

3. Key Facts
* The petitioner, M/S IJM Concrete Products Pvt. Ltd., challenged a summary order in Form GST DRC-07, issued consequent to an assessment order dated 26/07/2022 under Section 73(1) of the MPGST Act.
* The order raised a demand for excess Input Tax Credit (ITC) to the tune of Rs. 20,94,812/- (inclusive of CGST, IGST, SGST, interest, and penalty) for the period 01/04/2020 to 31/03/2021.
* The petitioner contended that the order was passed ex-parte without providing an opportunity of personal hearing, thus violating principles of natural justice and Section 75(4) of the Act.
* It was also argued that Rule 142(1A) of the CGST Rules, 2017, which prescribes issuing an intimation in FORM DRC-01A before a show cause notice in FORM DRC-01 under Section 73(1), was violated as DRC-01 was issued directly.

4. Arguments

• Taxpayer (M/s Ijm Concrete Products Pvt. Ltd.):

  • The assessment order and summary order (DRC-07) were passed in ex-parte proceedings without providing an opportunity of personal hearing, violating principles of natural justice and Section 75(4) of the Act.
  • Section 75(4) mandates an opportunity of hearing where an adverse decision is contemplated, irrespective of a written request. The use of the word "or" signifies this mandatory requirement.
  • Section 73(9) further requires the proper officer to pass an order after considering the representation made by the Assessee, implying a hearing.
  • "Opportunity of hearing" necessarily includes "personal hearing," and statutory forms themselves contemplate stages for personal hearings.
  • The proceedings were also bad in law due to non-adherence to Rule 142(1A) of the CGST Rules, which requires issuing FORM DRC-01A prior to FORM DRC-01.

• Revenue (The State of Madhya Pradesh):

  • Petitioners misinterpreted Section 75(4), which refers to "opportunity of hearing" not specifically "personal hearing."
  • The petitioner was required to opt for a personal hearing after receiving the show cause notice (DRC-01), which they admittedly did not do. Therefore, the respondents committed no fault.
  • Relied on Union of India and Another vs. Jesus Sales Corporation to assert that discretion must be exercised objectively.

5. Court’s Reasoning
* Interpretation of Section 75(4): The Court emphasized a plain reading of Section 75(4) of the GST Act. It held that an "opportunity of hearing" is mandatorily required in two situations: (a) when a specific written request is received from the taxpayer, or (b) when any adverse decision is contemplated against the taxpayer. The word "or" is crucial and makes the provision disjunctive, meaning the latter condition triggers the requirement even without a request.
* "Opportunity of Hearing" vs. "Personal Hearing": The Court rejected the State's argument that "opportunity of hearing" does not encompass "personal hearing." It noted that even the statutory forms envision different stages for "personal hearing," implying that a complete opportunity of hearing includes a personal hearing.
* Violation of Natural Justice: Since an adverse decision was undeniably 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, being contrary to both principles of natural justice and the statutory mandate of Section 75(4).
* No Opinion on Merits: The Court clarified that its decision pertained solely to the procedural lapse and did not express any view on the merits of the tax demand.
* Role of different officer: Following a precedent, the Court directed that the fresh hearing should be conducted by an officer other than the one who initially issued the show cause notice.

6. Statutory References
* Constitution of India, 1950 – Article 226
* Madhya Pradesh Goods & Service Tax Act, 2017 (MPGST Act)
* Section 73(1) (Determination of tax not paid etc., other than fraud)
* Section 73(5)
* Section 73(9) (Order after considering representation)
* Section 75(4) (General provisions relating to determination of tax – opportunity of hearing)
* Central Goods & Service Tax Act, 2017 (CGST Act) – (Equivalent sections as above)
* Central Goods and Services Rules, 2017 (CGST Rules)
* Rule 142(1A) (Intimation in FORM DRC-01A)
* Forms:
* FORM GST DRC-01A (Intimation of ascertainment of tax payable)
* FORM DRC-01 (Show Cause Notice)
* FORM GST DRC-07 (Summary of Order)

7. Precedents Cited
* Ultratech Cement v. State of Madhya Pradesh (Order dated 19.01.2023 passed in W.P. No. 617/2023) / (2023) 4 Centax 198 (M.P.) (19.01.2023) (Ultratech Cement Ltd. Vs. Union of India)
* 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)
* 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 (Cited by Revenue)