GST demand order set aside and matter remanded as ex parte adjudication was found violative of natural justice; court allows fresh opportunity to respond to show cause notice

Case Title: R.K. Traders v. Assistant Commissioner of Central Tax & Ors.
Court: High Court of Karnataka, Bengaluru
Petition No.: W.P. No. 24507 of 2024 (T-RES)
Category: Input Tax Credit / Demand and Recovery / Natural Justice
Date of Judgment: 3 April 2025
Relevant Provisions: Sections 74(9), 79(1)(c) of the CGST/KGST Act, 2017; Rule 142(1A) of the CGST Rules, 2017

Facts (Paras 3–5)

R.K. Traders, a proprietorship firm from Mysuru, faced a demand of ₹4.62 crore (including tax, interest, and penalty) under Section 74(9) of the CGST/KGST Act. The Assistant Commissioner had issued a pre-intimation notice dated 30.03.2023 under Rule 142(1A), to which the petitioner replied on 10.04.2023. Subsequently, a show cause notice dated 14.06.2023 under Section 74 and another pre-intimation of the same date were uploaded on the GST portal. However, the petitioner contended that these were never physically or electronically served, leading to an ex parte order on 05.10.2023 confirming the demand. The proceedings culminated in recovery action and bank account attachment under Section 79(1)(c) on 01.06.2024.

Questions Before the Court (Paras 2 & 4)

The key issue was whether the ex parte order under Section 74(9) could be sustained when the taxpayer asserted that he had not received due communication of the show cause and pre-intimation notices, depriving him of an opportunity to contest the proceedings.

Observations (Paras 6–8)

Justice S.R. Krishna Kumar noted that, although the respondents claimed electronic service through portal and email, it was undisputed that the petitioner had not filed any reply or contested the adjudication. Considering the assertion of bona fide reasons, unavoidable circumstances, and sufficient cause, the Court observed that a justice-oriented approach warranted giving the taxpayer one more opportunity to present his case rather than sustaining a massive ex parte demand order. The Court emphasized adherence to natural justice and procedural fairness under the GST regime.

Judgment (Paras 8–9)

The High Court allowed the writ petition, setting aside the order dated 05.10.2023 passed under Section 74(9). The matter was remanded to the Assistant Commissioner for reconsideration from the stage of reply submission to the show cause notice. The petitioner was directed to appear before the authority on 28.04.2025 and file his reply with supporting documents. The authority must provide adequate opportunity of hearing and proceed as per law. The Court also directed that failure to appear on the stipulated date would automatically recall this order.

Summary of Cases Referred

Between Fine Lines

For trade and industry, this judgment reiterates that even if notices are uploaded on the GST portal, proof of effective service remains critical. Ex parte orders passed without ensuring taxpayer’s participation can be set aside on grounds of natural justice. Dealers must, however, remain vigilant about portal communications to avoid procedural default.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”