The Hon’ble Uttarakhand High Court in Modine Thermal Systems (P.) Ltd. v. State of Uttarakhand [W.P. (M/B) No. 123 of 2025 dated April 21, 2025] held that fixing the date of personal hearing prior to the last date for filing a reply violates the scheme of the GST Act and natural justice. The Court set aside the assessment order and remitted the matter back to the authority.
Facts:
Modine Thermal Systems (P.) Ltd. (“the Petitioner”) was issued a show cause notice dated 18.06.2024 by the State of Uttarakhand (“the Respondent”) seeking explanation as to why a demand under section 74 shall not be confirmed for difference in value of between outward supplies declared in GSTR-1 and the value reflected in E-way Bills for the financial year 2020–21.
Subsequently, a second show cause notice in Form DRC-01 was issued on 28.11.2024 proposing a demand of ₹ 71,57,938/- along with interest under Section 74 of the CGST Act. The notice scheduled a personal hearing on 20.12.2024 and fixed 28.12.2024 as the last date for submission of reply.
The Petitioner sought adjournment of the hearing date to a date after the submission deadline, citing the need for time to collate relevant documents. The respondent however rejected the request, and the assessment was finalized.
Issue:
Whether fixing the date of personal hearing before the last date for submission of reply violates the procedural safeguards under Sections 73, 74 and 75 of the CGST Act?
Held:
The Hon’ble Uttarakhand High Court in W.P. (M/B) No. 123 of 2025 held as under:
- Violation of Natural Justice: The Revenue’s approach of fixing the personal hearing before the deadline for reply was “akin to putting the cart before the horse,” as the hearing must necessarily be based on the reply.
- Contrary to Statutory Scheme: A conjunctive reading of Sections 73, 74, and 75 of the CGST/ UGST Act shows that personal hearing should follow the submission of reply.
- Right to Adjournment Recognized: Section 75(5) allows the assessee to seek adjournment (not more than three times), and it follows the right to be heard under Section 75(4).
- No Justifiable Reason for Rejection: The order did not disclose any valid reason for rejecting the Petitioner’s request for adjournment.
- Statutory Compliance Mandatory: The Court reaffirmed the principle that statutory procedures must be followed strictly, and any deviation renders the action void.
Accordingly, the assessment order was quashed and the matter remitted back to the competent authority for fresh consideration from the stage of the 28.11.2024 notice.
Our Comments:
This judgment underscores the importance of adherence to procedural fairness under the GST framework. The High Court reaffirmed that the right to personal hearing and the right to reply are not isolated but are interconnected steps in the adjudication process. By disallowing a hearing before the deadline for reply, the Revenue undermined the assessee’s statutory rights, and the Court rightly intervened. The ruling reinforces that discretion under Section 75(5) must be exercised judicially and not arbitrarily.
It serves as a vital precedent for assessees facing high-pitched demands where procedural lapses occur and highlights that natural justice cannot be bypassed in the name of efficiency or formality.
The phrase ‘akin to putting the cart before the horse’ highlights the impropriety of the authority’s approach. Submissions during hearing are meaningful only after the reply is filed, making the authority’s insistence on an early hearing wholly misplaced. The ruling also echoes well settled law, that when a statute stipulates a procedure, that procedure must be followed precisely.
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