Ex parte GST demand set aside as taxpayer’s illness justified delay and warranted opportunity to participate in Section 73 proceedings

Case Title: M/s M.J. Infrastructure v. Joint Commissioner (Appeal), DGSTO-04 & Ors.
Court: High Court of Karnataka, Bengaluru
Petition No.: W.P. No. 4076 of 2025 (T-RES)
Category: Delay condonation and ex parte assessment under Section 73 – Natural justice
Date of Judgment: 25 February 2025
Relevant Sections: Sections 73 and 107 of the CGST / KGST Act, 2017; Article 226 of the Constitution of India

Facts (Paras 3–5)

The petitioner, M/s M.J. Infrastructure, a proprietary concern registered under the Karnataka GST Act, faced an ex parte order dated 30/31 March 2024 under Section 73 determining a tax liability of ₹2.09 crore. Due to severe heart ailments (cardiac functioning reduced to 40%) and subsequent heart surgery on 09 December 2024, the petitioner could neither respond to the show cause notice dated 31 December 2023 nor attend the hearing. His appeal before the Joint Commissioner (Appeals) was dismissed on 30 August 2024 under Section 107(11) for delay in filing. The petitioner sought the High Court’s intervention, citing medical incapacity as sufficient cause for the delay.

Questions Before the Court (Paras 3–6)

1. Whether the appellate authority was justified in rejecting the appeal solely on the ground of delay despite the petitioner’s genuine medical incapacity.

2. Whether the High Court could invoke jurisdiction under Article 226 to quash the original ex parte assessment under Section 73 despite the appeal being time-barred.

Observations (Paras 6–8)

Justice S.G. Pandit observed that the petitioner had substantiated his claim with medical records showing serious cardiac conditions and surgery. The Court noted that even though the appeal was time-barred, its jurisdiction under Article 226 to ensure fairness and compliance with natural justice remained intact. Relying on a coordinate bench decision in W.P. No. 3688/2024 (decided 12.03.2024), it was held that dismissal of an appeal for delay does not prevent the High Court from examining the legality of the original ex parte order.

The Court emphasized that an ex parte order passed under Section 73 without the taxpayer’s participation, especially where illness prevented compliance, violated principles of natural justice.

Judgment (Para 9)

The Court:

• Quashed the ex parte order dated 30/31.03.2024 passed under Section 73;

• Remitted the matter to the Assistant Commissioner (Audit), DGSTO-04, for fresh adjudication after granting opportunity to file objections to the show cause notice dated 30.12.2023;

• Directed the petitioner to appear on 26 March 2025 and file objections within four weeks;

• Imposed a condition that the petitioner must deposit 20% of the disputed tax (₹2.09 crore) within four weeks, failing which the order would not benefit him.

Between Fine Lines

This judgment underscores that genuine medical incapacity constitutes a “sufficient cause” for delay under GST proceedings. Even when an appeal is time-barred, the High Court retains power under Article 226 to restore proceedings if principles of natural justice are violated. Tax officers should exercise discretion humanely, especially when illness impairs compliance, while taxpayers must still demonstrate bona fides through medical evidence.

Summary of Cases Referred

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