Facts of the Case: The petitioner, a private limited company engaged in infrastructure development, challenged before the Gujarat High Court the legality of the Show Cause Notice (SCN) dated 29.05.2024 in Form GST DRC-01 and the Order-in-Original dated 10.08.2024 in Form GST DRC-07 issued under Section 74 of the Gujarat GST Act, 2017.

Earlier proceedings under Section 73 for mismatch between GSTR-3B and 2A were dropped. Later, proceedings under Section 61 and Rule 99 were initiated followed by DRC-01A and SCN under Section 74 alleging fraudulent availment of ITC from cancelled/non-genuine dealers to the tune of ₹32,99,801/-.

The petitioner filed detailed replies, reconciled certain amounts, paid part liability through DRC-03, and specifically sought personal hearing. It was contended that jurisdiction under Section 74 could not be assumed in absence of fraud, and that respondent no. 3 had already initiated scrutiny proceedings. The adjudicating authority, however, passed the adverse order based on a brief telephonic conversation with the petitioner’s representative and did not grant an in-person hearing.

Issue: Whether passing the adverse order under Section 74 without granting a personal hearing, and treating a telephonic call as sufficient compliance with Section 75(4) of the GST Act, violates the principles of natural justice and renders the order without jurisdiction?

Held that: The Gujarat High Court held that Section 75(4) of the GST Act mandates grant of an opportunity of personal hearing when requested or when an adverse decision is contemplated. A telephonic conversation cannot substitute such hearing.

Reliance placed on M/s. Jupiter Exports v. Commissioner of GST and BA Continuum India Pvt. Ltd. v. Union of India, wherein it was held that personal hearing is not an empty formality and must be meaningful; telephonic or casual interactions do not meet statutory requirements.

It was evident from the order sheet that the impugned order was passed after a phone call with the petitioner’s CA. Such action was in clear breach of Section 75(4) and the principles of audi alteram partem.

The Court quashed the impugned Order-in-Original dated 10.08.2024 and remanded the matter to the adjudicating authority.

Case Name: M/s KCC BUILDCON PRIVATE LIMITED vs. THE STATE OF GUJARAT & ORS. Dated 01.08.2025

To read the complete judgment 2025 Taxo.online 1897