GST Order Quashed for Lack of Hearing: Case Remanded for Fresh Consideration

Case Title: Paary Sweets and Bakery v. State Tax Officer (Inspection–V)
Court: High Court of Judicature at Madras
Petition No.: W.P.No.31108 of 2024
Date of Judgment: 22.10.2024
Relevant Section: Section 75(4) of CGST Act, 2017 (principles of natural justice), Rule 142 of CGST Rules, 2017
Category of Dispute: Input Tax Credit, Natural Justice

Facts of the Case [Para 3–4]

• The petitioner, Paary Sweets and Bakery, challenged the assessment order dated 10.05.2024 passed by the State Tax Officer for FY 2019-20 [Para 3].

• The dispute arose after an inspection by the Intelligence Wing on 19.04.2024. Subsequent notices (DRC-01A dated 20.07.2023 and DRC-01 dated 31.08.2023) alleged issues such as:

  1. Interest on belated tax payment

  2. Excess ITC claim (GSTR2A vs GSTR3B vs GSTR9)

  3. ITC reversal under Section 17(2)

  4. Credit notes not reversed

  5. Blocked credit availed [Para 4].

• The petitioner claimed that no physical or email communication of the notices or order was made. The notices were only uploaded under “Additional Notices and Orders” tab on the GST portal, which he was unaware of [Para 4].

• Due to this, the petitioner failed to reply to the SCN, and an ex parte order was passed without personal hearing [Para 4].

Question(s) in Consideration [Para 4, 7]

• Whether the assessment order dated 10.05.2024 is liable to be quashed for violation of principles of natural justice owing to absence of opportunity of hearing.

• Whether the service of notices only on the GST portal satisfies the requirements of due process under GST law.

Observations of the Court [Para 7–8]

• The Court held that since no opportunity of personal hearing was granted before passing the order, there was a violation of Section 75(4) of the CGST Act which mandates such opportunity in adverse cases [Para 7].

• Court noted that mere uploading of notices without effective service or follow-up communication was inadequate [Para 7].

• The Court accepted the State’s concession for remand, subject to payment of 10% of the disputed tax [Para 5, 8(i)].

Judgment of the Court [Para 8–9]

• The impugned assessment order dated 10.05.2024 is quashed, and matter is remanded back for fresh consideration.

• Conditions imposed:

  • Petitioner must pay 10% of the disputed tax within four weeks from receipt of order [Para 8(i)].

  • Quashing takes effect only after such payment [Para 8(ii)].

  • Petitioner to file objections with supporting documents within two weeks thereafter [Para 8(iii)].

  • Department shall consider the reply after granting personal hearing and pass fresh order in accordance with law [Para 8(iv)].

Between Fine Lines (Plain English Summary)

• The bakery was assessed without a fair chance to explain.

• The department only uploaded notices on the portal — no hearing happened.

• The High Court found this to violate natural justice.

• The assessment order is quashed but will revive unless the bakery pays 10% of the disputed tax.

• A fresh hearing will now happen with the bakery’s reply being considered.

Summary of Referred Cases

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