In a significant ruling, the Allahabad High Court has strongly criticized the mechanical and legally flawed functioning of GST authorities, setting aside a GST order of over ₹5.82 crore issued without providing a mandatory personal hearing. The Court also imposed a cost of ₹20,000 on the Joint Commissioner of SGST, Corporate Circle-1, Ghaziabad, for violating principles of natural justice and statutory provisions under the GST Act.
Background of the Case
The petitioner, Merino Industries Ltd., engaged in the manufacture and supply of potato flakes and other products, had received a show cause notice dated 03.08.2024 under Section 74 of the Goods and Services Tax Act, 2017, proposing a change in the classification of their goods. The notice suggested moving the classification from tariff heading 1105-2000 to 2005-2000, with a potential tax liability exceeding ₹5 crore.
However, crucially, the notice mentioned 'NA' in the columns for the date and time of personal hearing, despite a specific written request by the petitioner for a hearing.
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The order dated 04.02.2025, passed by the SGST officer, created a demand of ₹5,82,67,589.12 against the petitioner without granting any opportunity for personal hearing. This, the petitioner argued, was in direct violation of Section 75(4) of the GST Act.
"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."
— Section 75(4), GST Act, 2017
The division bench, comprising Chief Justice Arun Bhansali and Justice Kshitij Shailendra, expressed strong disapproval of the conduct of the officer and noted the increasing burden on the Court due to such repeated violations.
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“Innumerable cases have come before this Court where show cause notices have been issued and ex-parte assessments made... without ensuring personal service of the notices.”
The Court added that despite specific requests, authorities were bypassing the hearing provision and passing orders mechanically, without properly examining the electronic records or ensuring due process.
The Court relied heavily on its earlier decision in Laskin Engineering Pvt. Ltd. vs. State of U.P. & Another, decided on 16.05.2024, which clearly laid down the mandatory nature of personal hearings.
In that case, the Court had directed the Commissioner of Commercial Tax, Uttar Pradesh, to issue clear instructions to all officers to follow Section 75(4) and warned of disciplinary action for non-compliance.
"We cannot allow a practice to arise or exist where opportunity of personal hearing may be denied to a person facing adjudication proceedings."
— Allahabad High Court, Laskin Engineering Judgment
Pursuant to the Laskin judgment, the Commissioner had issued an Office Memo No. 1406 dated 12.11.2024, instructing officers not to use 'NA' for hearing dates and to ensure the reply dates precede the personal hearing.
Still, in the present case, these instructions were clearly disregarded. The Standing Counsel representing the State had no justification for this non-compliance.
Finding gross violation of legal and constitutional principles, the Court allowed the petition and quashed the GST demand order dated 04.02.2025. The matter was remanded to the concerned officer to pass a fresh order after affording personal hearing.
Further, the Court imposed a personal cost of ₹20,000 on the Joint Commissioner, SGST, directing the amount to be deposited with the High Court Legal Services Committee within four weeks.
"The cost shall be deposited by the officer... and proper training shall be imparted to officers as apparently circulars issued to them have been ignored."
The Court also reiterated the directions from the Laskin case, urging the Commissioner to initiate disciplinary proceedings against erring officials to avoid repeated violations, noting that the State continues to suffer due to such mechanical practices.
- Mandatory personal hearing must be provided under Section 75(4) if requested in writing.
- Officers cannot skip hearings just because proceedings are online.
- Disregarding court directions and circulars can lead to monetary penalties and disciplinary action.
- The judiciary will not entertain the defense of alternative remedies when principles of natural justice are openly violated.
- The State administration has a duty to train officers properly and ensure court orders and departmental circulars are strictly followed.
Case Title: Merino Industries Ltd. v. State of Uttar Pradesh and another [WRIT TAX No. - 1406 of 2025]
