The Allahabad High Court in the case of M/S SHREE SAI PALACE VERSUS STATE OF U.P. AND OTHERS vide Writ Tax No. – 50 of 2023 dated 21.02.2024, has held that the use of word ‘or' in Section 75(4) of Uttar Pradesh Goods and Service Tax Act, 2017 is disjunctive in nature which means that there are two situations provided in which opportunity of personal hearing must be afforded to an assesee and both situations must be considered independently while applying Section 75(4).

In this case, the department passed the impugned order levying penalty on the basis of documents seized during the survey, without granting opportunity of ‘personal hearing’ was not afforded to the petitioner which is a mandatory requirement under Section 75(4) of the UPGST Act, 2017. 

The Petitioner contended that even if no request is received from the person chargeable with tax or penalty, an opportunity of personal hearing must be granted if any adverse decision is contemplated against such person.

The Court held extracted the provisions of Section 75(4) of the UPGST Act, 2017 as under:

“75(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.”

It was stated as under:

i) When the word ‘or’ is used in a statute, it serves as a disjunctive conjunction, indicating two or more alternatives. Each option presented is to be considered independently. The significance of the word “or” in Section 75(4) of the UPGST Act, 2017 cannot be underestimated. The usage of the word “or” extends beyond its disjunctive function; it serves as a pivotal indicator of legislative intent regarding the necessity of providing an opportunity for personal hearing.

ii)  By incorporating “or” into the statutory language, lawmakers explicitly delineate two distinct scenarios in which the opportunity of personal hearing must be afforded: either upon application by the individual subject to penalty or tax imposition, or in the event of contemplation of an adverse order. 

iii) Personal hearing represents a fundamental aspect of procedural fairness and natural justice, ensuring that individuals have the opportunity to present their case, respond to allegations, and address any concerns or mitigating factors directly to the decision-maker.

iv) The Supreme Court also in the case of M/S. DHARAMPAL SATYAPAL LTD. VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE, GAUHATI & OTHERS reported in (2015) 8 SCC 519, upheld the importance of personal hearing before making any decision. The Supreme Court stated that even in administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking decision is necessary.

The Court quashed the and set aside the impugned order and directed the respondents to grant an opportunity of personal hearing to the petitioner and thereafter pass a reasoned order in accordance with the law.

To read the complete judgment 2024 Taxo.online 402