M/S Vishnu Essence Through Its Partner ... vs The State Of Madhya Pradesh on 11 July, 2025
AI Legal Insights
This GST case law concerns the Madhya Pradesh High Court's ruling in M/S Vishnu Essence Through Its Partner ... vs The State Of Madhya Pradesh. The core issue revolves around the validity of an assessment order passed under Section 74(9) of the MPGST Act. The petitioner argued that the order was unlawful because they were denied a mandatory personal hearing despite a written request, violating Section 75(4) and principles of natural justice. The High Court quashed the order, emphasizing that a personal hearing is distinct from merely submitting a reply and is required when requested.
This case reinforces taxpayers' right to a personal hearing when requested, particularly when an adverse decision is contemplated under GST law. Taxpayers can rely on this judgment to challenge orders passed without affording a requested personal hearing, while tax authorities must ensure compliance with Section 75(4).
- A personal hearing is mandatory under Section 75(4) of the MPGST Act if specifically requested in writing and an adverse decision is contemplated.
- Failure to grant a requested personal hearing violates principles of natural justice and can invalidate an assessment order.
- Statutory Form DRC-01 distinguishes between reply submission and the opportunity for a personal hearing.
- Merely submitting a written reply to a show cause notice does not satisfy the requirement of a personal hearing.
- High Court judgments such as Ultratech Cement and Technosys Security System support the interpretation of Section 75(4) as mandating a personal hearing.
QIs a personal hearing mandatory under GST?
Yes, according to Section 75(4) of the MPGST Act, if a taxpayer requests a personal hearing in writing and an adverse decision is contemplated, the tax authority is obligated to provide one. Failure to do so can invalidate the assessment order.
QWhat happens if a personal hearing is not granted in GST assessment?
If a personal hearing is not granted despite a written request, the assessment order can be challenged on the grounds of violating Section 75(4) of the MPGST Act and principles of natural justice. The order may be quashed and remanded for fresh adjudication, as seen in the M/S Vishnu Essence case.
Ruling Summary
Here's a summary of the judgment:
1. Outcome
The High Court of Madhya Pradesh allowed the writ petitions, quashed the impugned assessment order (DRC-07) dated 09.06.2023, and remanded the cases back to the respondent authority for fresh adjudication. The authority is directed to provide an opportunity of personal hearing to the petitioners before passing a new order.
2. Core Issue
The core issue was the legality and validity of an assessment order passed under Section 74(9) of the MPGST Act without affording the petitioner a mandatory personal hearing, despite a written request, thus violating Section 75(4) of the MPGST Act and the principles of natural justice.
3. Key Facts
* M/S Vishnu Essence, a registered partnership firm, was subjected to a search and seizure action under Section 67 of the MPGST Act on 10.01.2020.
* Based on reports, including one by a Chartered Engineer, proceedings were initiated under Section 74 of the MPGST Act by Respondent No. 3 (Deputy Commissioner of State Tax).
* An intimation (DRC-01A) dated 05.05.2022 was issued, demanding additional GST liability based on estimated electricity consumption.
* The petitioner filed objections to the intimation on 27.05.2022, requesting documents and quantification details.
* Subsequently, a Show Cause Notice (DRC-01) dated 01.03.2023 was issued under Section 74(1).
* The petitioner submitted a detailed reply to the SCN and specifically requested a personal hearing in writing.
* Despite the written request, no personal hearing was granted by the authority.
* The impugned order (DRC-07) dated 09.06.2023 was passed for the periods 2018-19 and 2019-20.
4. Arguments (Taxpayer vs Revenue)
* Taxpayer (M/S Vishnu Essence):
* The impugned order is cryptic, non-speaking, non-reasoned, and passed without application of mind.
* It constitutes a gross violation of principles of natural justice and Section 75(4) of the MPGST Act, as a mandatory personal hearing was not provided despite a written request.
* The determination of tax and penalty based solely on electricity consumption following a search action is illegal and against settled law, especially when such consumption details were already in the books of account.
* Relied on precedents emphasizing 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 held that Section 75(4) of the MPGST Act mandates an opportunity of hearing in two situations: (a) when a written request is received from the person chargeable, or (b) when an adverse decision is contemplated against such person. The use of "or" makes either condition sufficient.
* It clarified that "opportunity of hearing" includes "personal hearing," rejecting the argument that merely submitting a reply to a show cause notice suffices. The statutory form DRC-01 itself distinguishes between reply submission and personal hearing details.
* The Court found that since the petitioner had specifically requested a personal hearing in writing and an adverse decision was contemplated, it was obligatory and mandatory for the respondent authority to provide such an opportunity.
* The failure to provide a personal hearing amounted to a violation of both the statutory requirement of Section 75(4) and the fundamental principles of natural justice (Audi Alteram Partem), thereby vitiating the entire decision-making process.
* The Court relied on its own Division Bench judgments (e.g., Ultratech Cement and Technosys Security System) which had similarly interpreted Section 75(4) as mandating personal hearing in such circumstances.
6. Statutory References
* Article 226 of the Constitution of India
* Madhya Pradesh Goods and Services Tax, 2017 (MPGST Act):
* Section 67 (Search and Seizure)
* Section 67(2) (Report after search)
* 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) of the MPGST Rules
* Indian Partnership Act, 1932
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 (cited in Technosys Security System regarding statutory interpretation)
* M/s. BL Pahariya Medical Store (Allahabad High Court - cited in Technosys Security System)
* Graziano Trasmissioni India Pvt. Ltd. (supra) (cited in Technosys Security System)
Key Legal Principles
- It clarified that "opportunity of hearing" includes "personal hearing," rejecting the argument that merely submitting a reply to a show cause notice suffices. The statutory form DRC-01 itself distinguishes between reply submission and personal hearing details.
- The Court found that since the petitioner had specifically requested a personal hearing in writing and an adverse decision was contemplated, it was obligatory and mandatory for the respondent authority to provide such an opportunity.
- The failure to provide a personal hearing amounted to a violation of both the statutory requirement of Section 75(4) and the fundamental principles of natural justice (Audi Alteram Partem), thereby vitiating the entire decision-making process.
- The Court relied on its own Division Bench judgments (e.g., *Ultratech Cement* and *Technosys Security System*) which had similarly interpreted Section 75(4) as mandating personal hearing in such circumstances.