Adjudication orders quashed as ex-parte proceedings under GST were held without opportunity of hearing in violation of Sections 75(4) & 75(5)

Case Details

• Case Title: Limra Traders v. State of Jharkhand & Ors.

• Court: High Court of Jharkhand at Ranchi

• Petition No.: W.P.(T) No. 6027 of 2024 & W.P.(T) No. 6028 of 2024

• Date of Judgment: 04.03.2025 (CAV: 19.02.2025)

• Category of Dispute: Input Tax Credit (ITC) – Natural Justice in Adjudication

• Relevant Provisions: Section 74, Section 75(4) & 75(5) of JGST Act, 2017; Rule 86A(1)(a)(i) of JGST Rules, 2017

Facts

The petitioner, Limra Traders, a proprietorship firm engaged in trading of lubricants, bearing scraps and iron materials, duly discharged GST liabilities on purchases made from registered dealers including A.S. Enterprises and Vansh Enterprises for FY 2023–24. ITC of ₹33.24 lakh and ₹7.35 lakh was availed based on invoices, e-way bills, lorry receipts, and banking channel transactions (Para 3–6).

Authorities blocked ITC under Rule 86A, alleging the suppliers were non-existent, and issued show cause notices under Section 74(1). However, adjudication orders were passed ex-parte on the very first date of compliance, without granting the petitioner any opportunity of hearing (Paras 4–8).

Questions before the Court

1. Whether adjudication orders passed without granting a personal hearing contravened Sections 75(4) and 75(5) of the JGST Act, 2017?

2. Whether the impugned orders were sustainable despite prior inspections and summons under Section 70?

Observations

The Court examined the order sheets and noted that in both petitions, adjudication orders were passed on the very first date fixed, amounting to gross violation of principles of natural justice (Paras 7–8, 16–17).

The Court referred to its earlier decision in M/s Godavari Commodities Ltd. v. State of Jharkhand (W.P.(T) No. 3908 of 2020, decided on 18.04.2022), which emphasized mandatory compliance with Sections 75(4) and 75(5). These provisions require that:

• Hearing must be granted when adverse decision is contemplated;

• Adjournment can be granted if sufficient cause exists, with a maximum of three adjournments (Para 12).

Despite prior directions in Godavari Commodities, authorities continued to pass orders in stark disregard of procedure. The Court observed that such lapses not only violate taxpayer rights but also risk revenue loss to the State (Paras 14–15).

Judgment

The Court held that the impugned adjudication orders dated 05.06.2024 and 10.07.2024 were void for violating principles of natural justice and statutory provisions under Sections 75(4) & 75(5). Both writ petitions were allowed, orders quashed, and costs of ₹1,00,000 per petition (₹2,00,000 in total) were imposed on the respondents (Para 20).

However, liberty was granted to the Department to initiate fresh proceedings in accordance with law (Para 20).

Table of Cases Referred

Between Fine Lines

This ruling reinforces that GST adjudication cannot be rushed through ex-parte orders. Taxpayers must be given a meaningful hearing before adverse action. For businesses, this judgment means that if authorities issue orders without adhering to Section 75 safeguards, such orders are liable to be struck down, even with costs imposed on the Department.

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