M/S Vishnu Essence Through Its Partner ... vs The State Of Madhya Pradesh on 11 July, 2025
AI Legal Insights
This GST case law from the Madhya Pradesh High Court addresses the critical issue of mandatory personal hearings under Section 75(4) of the MPGST Act. In M/S Vishnu Essence Through Its Partner ... vs The State Of Madhya Pradesh, the court examined the validity of an assessment order (DRC-07) issued under Section 74(9) of the MPGST Act. The core issue was whether denying the petitioner a requested personal hearing, while contemplating an adverse decision, violated the principles of natural justice. The High Court ultimately quashed the assessment order, emphasizing the importance of affording taxpayers a fair opportunity to be heard.
This case reinforces taxpayers' right to a personal hearing when facing adverse GST assessments, especially when requested in writing. Tax authorities must adhere to principles of natural justice and Section 75(4) of the MPGST Act to ensure fair adjudication.
- Mandatory personal hearing is required under Section 75(4) MPGST Act if requested and adverse decision is contemplated.
- Assessment orders issued without affording a requested personal hearing are liable to be quashed.
- Principles of natural justice are integral to GST adjudication processes.
- Search and seizure operations under Section 67 MPGST Act must be followed by fair assessment procedures.
- Taxpayers should formally request personal hearings when responding to GST notices.
QWhat happens if a personal hearing is denied in GST?
If a personal hearing is requested by the taxpayer and denied by the GST officer before passing an adverse order, the assessment order is liable to be quashed for violating Section 75(4) of the MPGST Act and principles of natural justice.
QIs a personal hearing mandatory in GST assessment?
A personal hearing is mandatory under Section 75(4) of the MPGST Act if the taxpayer requests it in writing and the GST officer contemplates passing an order detrimental to the taxpayer's interests. This ensures fairness and adherence to natural justice principles.
Ruling Summary
Outcome**
The High Court allowed the writ petitions, quashing the impugned assessment order (DRC-07) dated 09.06.2023. The cases were remanded back to the respondent authority for fresh adjudication after affording the petitioners an opportunity of personal hearing.
2. Core Issue
The core issue was whether the impugned assessment order, passed under Section 74(9) of the MPGST Act, was legally valid when the petitioner was not afforded a mandatory personal hearing, despite a written request and the contemplation of an adverse decision, as required by Section 75(4) of the MPGST Act and principles of natural justice.
3. Key Facts
* M/S Vishnu Essence, a registered partnership firm, underwent a search and seizure operation under Section 67 of the MPGST Act on 10.01.2020.
* Based on reports from the search wing and a Chartered Engineer (estimating electricity consumption), the jurisdictional authority (Respondent No. 3) initiated proceedings under Section 74 of the MPGST Act for the periods 2018-19 and 2019-20.
* An intimation (DRC-01A) dated 05.05.2022 was issued, demanding additional CGST, SGST & CESS.
* The petitioner filed objections on 27.05.2022, seeking documents and details regarding the demand.
* Ignoring these objections, a show cause notice (DRC-01) dated 01.03.2023 was issued under Section 74(1).
* The petitioner submitted a detailed reply to the show cause notice and specifically requested a personal hearing in writing, as provided under Section 75(4) of the MPGST Act.
* However, no personal hearing was granted to the petitioner before the final assessment order (DRC-07) dated 09.06.2023 was passed, leading to the challenge.
4. Arguments
* Taxpayer (M/S Vishnu Essence):
* The impugned order (DRC-07) is cryptic, non-speaking, non-reasoned, and passed without proper application of mind.
* The order was passed in gross violation of the principles of natural justice and the mandatory statutory requirement of Section 75(4) of the MPGST Act, as a personal hearing was not afforded despite a written request.
* The determination of tax/assessment based on search action and solely on electricity consumption is illegal and contrary to settled law.
* Relied on precedents like Technosys Security System (P) Ltd. Vs. Commissioner, Commercial Taxes and Future Consumer Ltd. Vs. State of M.P. which underscore the mandatory nature of personal hearings.
* Revenue (State of Madhya Pradesh):
* Contended that the impugned order was passed following due procedure as provided under the law.
* Opposed the prayer for quashing the order and sought dismissal of the petitions.
5. Court’s Reasoning
* The Court emphasized the clear and mandatory language of Section 75(4) of the MPGST Act, which states that an opportunity of hearing shall be granted either upon a written request or where an adverse decision is contemplated.
* It affirmed that the principles of natural justice, specifically "Audi Alteram Partem" (the right to be heard), are fundamental and require a just, fair, and reasonable procedure.
* Citing its own Division Bench judgment in Ultratech Cement vs. State of Madhya Pradesh and the judgment in Technosys Security System (P) Ltd., the Court reiterated that personal hearing is mandatory before passing any adverse order, especially when requested in writing or when an adverse decision is imminent.
* The Court highlighted that the statute itself, through the format of DRC-01, differentiates between submitting a reply and a personal hearing, indicating that mere submission of a reply does not obviate the need for a personal hearing.
* It concluded that the authority had committed an apparent error of law by failing to provide the statutorily mandated opportunity of personal hearing, which vitiated the entire proceedings.
6. Statutory References
* Constitution of India, Article 226
* Indian Partnership Act, 1932
* Madhya Pradesh Goods and Services Tax, 2017 (MPGST Act)
* Section 67 (Search and Seizure)
* Section 67(2)
* Section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts)
* Section 74(1)
* Section 74(5)
* Section 74(9)
* Section 75(4) (General provisions relating to determination of tax)
* Rule 142(1A)
7. Precedents Cited
* Technosys Security System (P) Ltd. Vs. Commissioner, Commercial Taxes (2023) 157 taxmann.com 145 (MP)
* Future Consumer Ltd. Vs. State of M.P. (2025) 171 taxmann.com 702 (M.P.)
* A.S. Motors Private Limited vs. Union of India (2013) 10 SCC 114
* Ultratech Cement vs. State of Madhya Pradesh (W.P. No. 617/2023, Order dated 19.01.2023)
* Nelson Motis Vs. Union of India (1992) 4 SCC 711
* M/s. BL Pahariya Medical Store (Allahabad High Court judgment, specific citation not provided in the text)
* Graziano Trasmissioni India Pvt. Ltd. (specific citation not provided in the text, cited within Technosys judgment)