FEBRUARY 07, 2024

By Vijay Kumar

"BASED on the above submissions, further proceedings in the matter may kindly be dropped. If you do not propose to drop further proceedings, we may be given an opportunity of personal hearing."

I used to make my clients write the above sentences while replying to Show Cause Notices to ensure that:

1. Hearing can be avoided if the adjudicating authority has decided to drop further proceedings based on my reply to the Show Cause Notice (which has never happened)

2. Opportunity of hearing is not denied on the ground that it was not asked for.

As per Section 75(4) of the GST Act,

"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."

So, now the hearing shall be granted if:

1. a request is made.

or

2. any adverse decision is contemplated.

Thus, hearing is mandatory, and the adjudicating authority has no choice.

Yet we come across several cases where the taxpayers must approach High Courts with the grievance that personal hearing is not granted, and adverse decisions are passed. Very recently, on February 01, 2024, the Allahabad High Court had to pass an order in such a case. The High Court observed, [K.J. ENTERPRISES v. STATE OF U.P. AND OTHERS 2024-TIOL-166-HC-ALL-GST]

Without delving into the merits of the instant case, it is crystal clear that an opportunity of 'personal hearing' was not afforded to the petitioner which is a mandatory requirement under Section 75(4) of the UPGST Act, 2017.

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 High Court explained the meaning of "OR"

"6. When the word 'or' is used in a statute, it serves as a disjunctive con- junction, indicating two or more alternatives. Each option presented is to be considered independently. It is crucial to recognize that the disjunctive nature of "or" precludes its interpretation as a conjunctive conjunction, such as "and". Unlike, "and", which implies a requirement for the simultaneous fulfilment of multiple conditions, "or" allows for flexibility and choice by permitting compliance with any one of the alternatives presented. Attempting to read "or" as "and" in a statute would fundamentally alter its meaning and undermine the legislative intent behind its use. Such an interpretation would impose stricter criteria or conditions than intended by the statute, potentially leading to absurd or unreasonable outcomes.

7. Courts have consistently upheld the disjunctive nature of "or" in statutory interpretation, adhering to the principle of giving effect to the plain and ordinary meaning of the language used in the statutes. This principle, known as the plain meaning rule or the literal rule of interpretation, emphasizes the importance of interpreting statutes based on their plain and ordinary meaning, as understood by the average person reading the text of the statute. Moreover, the disjunctive function of "or" in statutes is essential for upholding principles of fairness, equity, and access to justice. By offering alternative paths or options, statutes accommodate diverse individual needs and situations, promoting inclusivity and mitigating potential disparities or injustices. This is particularly significant in areas of law concerning rights, benefits, and entitlements, where the flexibility provided by "or" ensures that legal provisions can be applied in a manner that reflects the realities and complexities of human experiences."

The Court further explained:

9. 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. 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. 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. It is a vital safeguard against arbitrary or unjust decisions. The inclusion of "or" in Section 75(4) of the UPGST Act, 2017, emphasizes the dual nature of the obligation to provide a personal hearing, accommodating both proactive requests from individuals seeking to defend their interests and reactive responses to adverse orders contemplated by tax authorities. In either scenario, the statutory mandate remains clear: the individual must be afforded an opportunity for personal hearing before any final determination is made regarding tax or penalty imposition. Moreover, the statutory mandate for personal hearing reflects an acknowledgement of the complex and multifaceted nature of tax and penalty determinations, which often involve intricate legal and factual considerations. Personal hearing provides a forum for nuanced discussion and exploration of these complexities, enabling decision-makers to make well-informed and equitable decisions based on a comprehensive understanding of the circumstances at hand.

This is not the first time that a High Court had to tell Revenue that personal hearing is mandatory and not at the discretion of the adjudicating authority.

In Ayyanar Steel Trading - 2021-TIOL-1894-HC-MAD-VAT, the Madras High Court observed,

10. A plain, but careful reading of the sub-section (4) of Section 75 and the language in which it is couched, makes it clear that opportunity of hearing to the person chargeable with tax is statutorily imperative not only when such person makes a specific request in writing, but also when an adverse decision is contemplated against such person and these two situations are put together in sub-section (4) by connecting the two by 'or'. In other words, these two are not conjunctive and they have not been put together by using the conjunction 'and'.

In Ultratech Cement Ltd - 2023-TIOL-114-HC-MP-GST, the High Court observed,

Admittedly, as per Section 75(4) of the Act, personal hearing is mandatory before passing any adverse order against the assessee. In the circumstances, we see no reason why we should wait for the respondents to file the reply and prolong the agony of the petitioner and also waste precious judicial time. If the Assessing Officer had only considered the file properly and dealt with the reply filed by the petitioner, then the need for the petitioner to approach this Court would not have arisen.

Nobody shall be condemned unheard became a little irksome for the babus and they decided that silly principles like hearing and natural justice were a burden to the serious business of tax collection. In any case, they had already perfected the art of personal hearing to a funny farce. What is the use of giving you a hearing if I am, anyway, going to decide against you?

Mostly, it is the State GST officers who are shy of giving personal hearing, as perhaps they were not used to this kind of rigorous principles. The officers don't lose anything by granting a personal hearing, but by not doing so, they are clogging the High Courts with such unnecessary litigation.

See this story, I wrote thirteen years ago.

Personal Hearing - A Big Farce

The other day, a client wanted me to attend a personal hearing before an adjudication authority. I told him, "it's a waste of time; you can send your clerk or peon and ask him to reiterate the submissions made in the reply to the Show Cause Notice."

The Client was not impressed and he along with another lawyer appeared for the personal hearing. After a harrowing experience, he cursed himself for not following my advice.

He explained his experience to me:

"At the appointed time, we went to the office of the adjudicating authority and we were told that Sir has gone for lunch and not yet returned. We waited patiently - there was no place for us to sit outside his office, the few chairs on the veranda were occupied by important looking peons.

After more than an hour, we are ushered into the chambers of the adjudicating authority. He is surrounded by half a dozen officers all with urgent files and he is giving directions to all of them. He gets a few telephone calls and answers all of them leisurely. During all this, he asked us a few times, "yes, tell me", but unfortunately had no time or mood to listen to us. Twice he was called by his boss and he went out and came in after about thirty minutes. Not even once he mentioned to his boss or the telephone callers that he had a personal hearing and the party was before him. After more than two hours, he tells us, "okay you have anything new to submit other than what you have already mentioned in the reply?". Then he calls his steno and tells us, "you dictate to her whatever you want to say; I will just come back; okay?"

Even Supreme Court Judges do not enjoy this kind of privilege; once they come to the court, they have to sit there!

Why can't Departmental officers ensure that a particular time is slotted for personal hearing and during that time they are not disturbed by subordinates or superiors? Adjudication should not only be done but seem to be done!

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Reading is not a favourite pastime with many adjudicators and most of their orders are written by Inspectors and Superintendents who are not present during the hearings and so they simply do not know what happened during the hearing. And when the order is put up for signature, the adjudicator does not remember what happened during the personal hearing. So even in the rare cases when the adjudicating officer is convinced about the case during the hearing, this conviction is not found in the ultimate order, because of the gap. If one person hears and another decides, then personal hearing becomes an empty formality.

xxxx

Personal Hearing at 12.53 hrs - Shubh Muhurat ?

Here is a Commissioner who knows the value of time - every minute is precious. He has fixed a personal hearing at 12.53 hrs! And his Superintendent who sent the PH Intimation states that no adjournment will be granted and if the assessee fails to appear at the time fixed (mind you 12.53 by the minute - not a second before not a second later), the matter will be decided ex-parte.

Normally we find such precise time being fixed for occasions like wedding, but it is perhaps a good omen that the Revenue officers also follow these auspicious timings. Maybe the assessee should be given an option to choose the time so as to exclude durmuhurat and rahu kalam!

Maybe in the next few years, we should have artificial intelligence for adjudication!

Until next week