Case Details
Case: M/s Rajlaxmi Constructions Ltd., Cuttack v. Union of India and Others
Court: High Court of Orissa at Cuttack
Bench: Justice Manash Ranjan Pathak and Justice Murahari Sri Raman
Case No.: W.P.(C) No. 17210 of 2026
CNR No.: ODHC010404712026
Order Date: 14 August 2026
Provision involved: Section 74 of the CGST/OGST Act, 2017
Decision: In favour of the petitioner; adjudication order set aside and matter remitted
Background
M/s Rajlaxmi Constructions Ltd. approached the Orissa High Court challenging a show cause notice issued in Form GST DRC-01 on 28 May 2024 under Section 74(1) of the CGST/OGST Act. The company also challenged the consequential adjudication order dated 16 March 2026 and the summary order issued in Form GST DRC-07.
The proceedings related to the tax period from April 2019 to March 2020 and resulted in a total demand of ₹28,80,95,516.
The petitioner contended that the proceedings had been initiated by the Deputy Commissioner of State Tax on the basis of WAMIS data without properly considering the figures disclosed in its returns. However, the final adjudication order was passed by the Assistant Commissioner of State Tax, an officer stated to be lower in rank than the officer who had initiated the proceedings.
Personal Hearing Specifically Requested
The petitioner submitted a reply dated 28 June 2024 in which it expressly requested a personal hearing before the Deputy Commissioner of State Tax, Kendrapada Circle.
Despite this request, the Assistant Commissioner of State Tax passed the adjudication order without granting the petitioner an opportunity of personal hearing. Before the High Court, the State GST Department did not dispute that the requested hearing had not been provided.
The petitioner also argued that the same transactions had already been taken cognizance of by the Central GST authorities and, therefore, the State proceedings were barred by Section 6(2) of the GST Act. Reliance was placed on the decision in Tansam Engineering and Construction Company v. Commissioner, CGST and Central Excise, Rourkela Commissionerate.
High Court’s Findings
The High Court observed that the admitted denial of personal hearing constituted a flagrant violation of the principles of natural justice. The Court also noted that the matter involved jurisdictional issues.
Relying upon its decision in Janardan Panda v. Commissioner, Commercial Tax & GST, Odisha and Others, the Court reiterated that a reply to a show cause notice cannot be treated as an empty formality. The adjudicating authority must consider the taxpayer’s reply, apply its mind independently and provide reasons for rejecting or differing from the explanation offered.
Since the petitioner was not afforded a reasonable opportunity of hearing, the adjudication order could not be sustained.
Decision
The High Court set aside the order dated 16 March 2026 passed by the Assistant Commissioner of State Tax, CT&GST Circle, Kendrapada, under Section 74 of the GST Act.
The matter was remitted to the adjudicating authority for a fresh decision on merits after providing the petitioner a reasonable opportunity of hearing. The petitioner was permitted to produce evidence in support of its claim and to raise all legal and factual issues.
The Court directed the adjudicating authority to consider and deal with those issues while passing a fresh order.
Significantly, the Court did not finally decide the petitioner’s objections regarding adjudication by an officer of a lower rank or the alleged bar under Section 6(2). Those questions were left open for consideration during fresh adjudication.
Key Takeaway
When a taxpayer specifically requests a personal hearing in proceedings under Section 74 of the GST Act, an adjudication order cannot validly be passed without granting that opportunity. Denial of the requested hearing amounts to a violation of natural justice and may result in the order being set aside, even where an alternative statutory remedy is otherwise available.