NOVEMBER 26, 2024

By Mr M G Kodandaram, IRS. Assistant Director (Retd) ADVOCATE and CONSULTANT

Introduction

THE principle of natural justice serves as the foundation of a fair and impartial legal system, ensuring that every individual has a reasonable opportunity to be heard before decisions impacting their rights are made. Personal hearings, as a crucial expression of this principle, play a vital role in safeguarding procedural fairness and protecting the interests of all stakeholders. By allowing individuals to present their case, address allegations, and provide clarifications, personal hearings not only ensure fairness but also enhance the perception of justice. This is particularly significant in the trust-based, voluntary compliance framework of GST.

Whether conducted in physical or virtual formats, personal hearings uphold the right to be heard in a fair and transparent manner, a fundamental element of natural justice that sustains public confidence in adjudicatory processes. The COVID-19 pandemic stressed the necessity of integrating technology to maintain the continuity of governmental functions. In the sphere of tax administration, the crisis accelerated the adoption of virtual platforms for adjudicatory and appellate proceedings.

Feedback from trade and field formations revealed that this initiative significantly accelerated adjudication and appellate proceedings, reducing travel costs and time while ensuring social distancing during challenging times. It was recognized as beneficial for various stakeholders, including GST suppliers, importers, exporters, passengers, advocates, tax practitioners, and authorized representatives.

In response, the Central Board of Indirect Taxes & Customs (CBIC) issued a landmark instruction on August 21, 2020 (file F.No. 390/Misc/3/2019-JC), mandating the use of video conferencing (VC) for personal hearings under various tax laws. The directive stated: "The Board has now decided to make it mandatory for various authorities, such as Commissioner (Appeals), original adjudicating authorities, and Compounding Authority, to conduct personal hearings in proceedings under the Customs Act, 1962, Central Excise Act, 1944, and Chapter V of the Finance Act, 1994, through video conferencing. This facility shall also be extended to proceedings under the CGST Act, 2017, and the IGST Act, 2017."

Evolution of Virtual GST Hearings

In the cited instruction dated August 21, 2020, guidelines for conducting virtual hearings were issued to ensure the timely completion of appeals and adjudications, facilitating swift delivery of justice through quasi-judicial proceedings. The guidelines adhered to the directives issued by the Hon'ble Supreme Court under Article 142 of the Constitution of India in Suo Moto Writ (Civil) No. 5/2020. They outlined the procedures for conducting mandatory personal hearings via video conferencing.

It was emphasised that although personal hearings through video conferencing are mandatory, there may still be exceptional circumstances on the part of the assessee or their authorised representative that prevent this from being possible. In such cases, each request must be approved by the adjudicating or appellate authority, with the reasons for the decision documented in writing. This measure, by removing geographical barriers and logistical challenges, ensured continuous adjudication, protecting taxpayers' rights and upholding the principles of natural justice.

However, in a subsequent amendment issued on July 28, 2022, surprisingly the CBIC introduced flexibility. The default option reverted to physical hearings, while virtual hearings were allowed only upon specific request.

However, with the issuance of the instruction on November 5, 2024, virtual hearings have been reinstated as the default method for quasi-judicial and appellate proceedings, superseding the previous directive from July 28, 2022. This move marks a return to the proactive approach of 2020, reaffirming the commitment to modernizing tax processes while allowing physical hearings in exceptional circumstances. Physical hearings are only permitted if requested in writing by the parties, with authorities required to provide a documented justification for any deviation. This standardized approach seeks to streamline dispute resolution, reduce delays, and institutionalize digital practices for future challenges, ensuring consistency and accountability in the process.

The reinstatement of virtual hearings offers numerous advantages, reinforcing the quasi-judiciary's role in adapting to contemporary challenges. The virtual hearings eliminate the need for physical travel, empowering taxpayers from remote regions to participate seamlessly. By mitigating scheduling conflicts and minimizing logistical hurdles, VC hearings expedite the resolution of cases. The real-time recording of proceedings ensures a transparent adjudication process, reinforcing public trust. The reduction in travel and accommodation expenses benefits both taxpayers and the government. The Institutionalizing VC hearings equips the system to handle disruptions effectively, ensuring continuity in governance.

Need of Rules for Virtual GST Hearings

It is important to note that while the CBIC has mandated virtual hearings, the state authorities continue to rely on the traditional method of conducting physical hearings. As a result, this partial measure has not ensured uniform compliance across the GST regime. However, some States have issued certain instruction for conduct of GST hearings through video conferencing and are not mandatory to be adhered to by the authorities. The Rajasthan Commercial Taxes Department, in alignment with national efforts, issued guidelines on April 18, 2022, (GOVERNMENT OF RAJASTHAN COMMERCIAL TAXES DEPARTMENT No. F. 5 Misc./Appeals/Legal/CCT/15-16/2370 | Jaipur, Dated 18.04.2022 INSTRUCTION) to conduct virtual hearings under GST and VAT. The procedures prescribed vary in comparison to CBIC instructions. The lack of uniformity in legal procedures across the GST framework poses a challenge to achieving consistent governance. (Read From Compliance to Courtroom: Non-Uniform GST Adjudication Spurs Litigation, - NOVEMBER 04, 2024, by the Author) To fully embrace technology in adjudication and appeals, a standardized set of GST rules are essential for ensuring a cohesive and effective system nationwide.

While the CBIC has mandated virtual hearings through its instructions, the lack of a uniform framework at the state level creates a gap in consistent enforcement across the GST system. State authorities are not bound to adopt virtual hearings, which undermines the goal of a standardized and efficient process. To address this, the GST Council should take the necessary steps to establish clear rules making virtual hearings mandatory for all authorities within the GST regime. The procedures for mandatory hearing could be incorporated into GST legal framework in line with income tax provisions (e.g., section 144B(6)(viii) of the Income Tax Act) so that it is enforceable under law. Such a move would ensure uniformity in the conduct of hearings, not only at the state level but also within the Goods and Services Tax Appellate Tribunal (GSTAT), streamlining proceedings for both taxpayers and authorities. Moreover, it would strengthen the proposed faceless adjudication and appellate mechanisms, ensuring they are implemented effectively and consistently. (read Faceless GST Adjudication: Simplifying the Path to Fairness, - SEPTEMBER 04, 2024, by the Author) A unified legal framework for virtual hearings would enhance the overall transparency, accessibility, and efficiency of the GST system, ultimately contributing to a more modern, equitable, and technology-driven tax administration.

[The views expressed are strictly personal.]