Grant of personal hearing as contemplated u/s 98(2) CGST Act does not mean to be an empty formality

Hearing a petition challenging that rejection of the Petitioner’s application for advance ruling under relevant provisions of the CGST Act, without granting the Petitioner an opportunity of personal hearing, the High Court of Karnataka, observed that grant of personal hearing as contemplated under Section 98(2) of the CGST Act would not mean to be an empty formality.

A Single Judge Bench of Justice B M Shyam Prasad further observed that the Petitioner could have been informed that its application was liable to be dismissed, instead of being dismissed in limine without granting an opportunity of hearing.

The Petitioner was represented by Ms. Veena J. Kamath., Advocate, whereas the Respondent was represented by Mr. K. Hema Kumar., AGA. 

Briefly, application filed seeking Advance Ruling was rejected without being admitted for hearing – Applicant’s grievance with the order dated 29 November 2022, apart from the merits of the reasons assigned, is that their application was rejected without due opportunity to show cause against the reason assigned – Respondent, interpreting the expression ‘being’ as found in Section 97(2)(g) of the KGST/CGST Act, has opined that the phrase ‘being undertaken’ can only refer to an ongoing and continuous supply and with the petitioner’ contractual period having expired, the application cannot be admitted.

On hearing the contentions of both sides, the Bench observed that opportunity of hearing as contemplated under Section 98(2) cannot be an empty formality, and the Petitioner should have been informed that the application could be rejected without admission on the ground the corresponding contractual period has expired.

Therefore, the Bench opined that the opportunity of hearing contemplated was rendered a mere formality. The Petitioner must, therefore, have appropriate liberty to file additional plea to show cause against such reasoning and the Respondent had to reconsider the application.

As regards the question that the Petitioner sought to raise before the Authority for Advance Ruling (AAR), the Bench noted that it was for the AAR to answer the same and that the High Court’s intervention was limited to the aspect of the principles of natural justice having been contravened, on account of denial of opportunity of hearing, whereas the statute mandates granting such opportunity of hearing.

With these observations, the Bench dismissed the order of the AAR rejecting the Petitioner’s application. The Petitioner was left at liberty to seek fresh hearing over its application.

Cause Title: M/s KBL SPML 25JV vs AAR, Karnataka [W.P No. 1119 of 2023 (T-RES) / 2023-Enterslice-17-HC-Kar-GST]

Click here to read/download the order.

KBL-SPML-25JV-vs-AAR-Karnataka