It is a well-established principle of natural justice that no decision shall be given against a person without
awarding him an opportunity of reasonable hearing. ‘Audi Alterem Partem’ is a Latin phrase which
means ‘listen to the other side or let the other side be heard as well’. It is a fair chance given to each side
to present their case, make arguments and submit representations and documents in support of their
proposition and for their defense.
Show Cause Notice must be issued
The purpose of issuing a show cause notice is to intimate the party, who has to show cause as to what is
the allegation against him for which he has to respond. The notice apart from being clear and
unambiguous and specific, it should also be issued with an open mind, which should be manifest on
reading of the show cause notice. Every statute provides its own mechanism for initiation and
continuation of adjudication proceedings. However, even if there is no specific provision for ‘show cause’
in a statute, no action shall be taken against any party without being heard. In the case of Maneka Gandhi v. Union of India [1978 (1) TMI 161], the Hon’ble Supreme Court observed that it is well established that even where there is no specific provision in a statute or rules made thereunder for showing cause against action proposed to be taken against an individual, which affects the rights of that individual, the duty to give reasonable opportunity to be heard will be implied from the nature of the function to be performed by the authority which has the power to take punitive or damaging action.
In a recent case of M/s Laxmi Barter Private Limited versus the Union of India & Ors. [2021 (11) TMI 888], Hon’ble Patna High Court set aside the Order passed by the Assistant Commissioner of State Tax on the grounds of violation of principle of natural justice and that the order does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. It was submitted by the petitioner that the Order was passed without issuance of show cause notice.
Hearing
Reasonable opportunity of hearing or fair hearing is a vital facet of this maxim. It is the duty of the
authority to confer upon the assessee / noticee, a fair chance of presenting his case before an unbiased and impartial judge. This ingredient is considered to be a basic requirement in the court proceedings. The term ‘reasonable’ is subjective. Hence, a reasonable opportunity of hearing cannot be interpreted in a stringent manner owing to the fact that principles of natural justice are flexible. Simply put, a privilege is given to the party in concurrence with ‘audi alterem partem’ to submit his arguments, whether written or oral.
Order should not traverse beyond the Show Cause Notice
In several cases it has been observed that the Demand Orders have been passed on grounds which were
not mentioned in the show cause notice at all. The Hon’ble Madras High Court in the case of R. Ramadas versus The Joint Commissioner of Central Excise [2020 (11) TMI 84] observed that it is a settled proposition of law that a show cause notice, is the foundation on which the demand is passed and therefore, it should not only be specific and must give full details regarding the proposal to demand, but the demand itself must be in conformity with the proposals made in the show cause notice and should not traverse beyond such proposals. Similarly, the Hon’ble Jammu & Kashmir High Court in the case of Navneet R. Jhanwar versus State Tax Officer & Ors. [2021 (3) TMI 857] remanded the matter to the lower authority on the ground that the Order was not in conformity with the proposal made in the show cause notice.
Audi Alterem Partem in ‘The GST Law’
Section 75(4) of the CGST Act, 2017 prescribes 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(7) of the CGST Act, 2017 states that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice. The GST Law stipulates providing a fair chance of hearing to the assessee.
However, there has been a surprising amendment in Rule 21A(2) of the CGST Rules, 2017 which
provides for suspension of registration by the proper officer during the pendency of GST registration
cancellation proceedings. With effect from 22.12.2020, the phrase “after affording the said person a
reasonable opportunity of being heard” has been omitted from the said sub-rule. Resultantly, the officer
may suspend the registration of a taxpayer during the pendency of cancellation proceedings without an
opportunity of hearing. The arbitrariness of this change should be challenged before the judiciary.
Conclusion
Although there is a plethora of judgments in and around this maxim, yet it has been observed that Orders in violation of this principle of equity have been passed time and again by the authorities. In several cases reasonable time is not provided in the show cause notice whereas, in other cases it has been observed that Orders have been passed by the authorities without expiry of the time awarded in the show cause notice. It is crucial to appropriately respond to such Orders.
Author: CA Sakshi Jhajharia
Published in ACAE journal