Karnataka High Court Sets Aside Ex-Parte GST Order Passed Without Allowing Reply To Show Cause Notice

The Karnataka High Court has set aside an ex-parte GST order passed against Medizen Labs Pvt. Ltd. after noting that the adjudicating authority issued the order without considering any reply from the taxpayer.

The court observed that, in the facts of the case, it would be appropriate to give the assessee an opportunity to respond to the show cause notice before the matter is decided on merits.

A single-judge bench of Justice S. Sunil Dutt Yadav was hearing a writ petition filed by the bengaluru based company challenging an Order-in-Original passed under Section 73 of the CGST Act. The petitioner also sought refund of Rs 60,60,770, which had been recovered from its bank account pursuant to the impugned order.

The bench observed,

“Perusal of the order at Annexure-A would indicate that the order-in-original has been passed without the benefit of any reply to the show cause notice.... Taking note of the contentions raised and the recovery of substantial amount of tax, it would be appropriate to accede to the request of the petitioner to afford an opportunity to take its stand on merits."

According to the petitioner, the order was passed without submitting any reply to the show cause notice due to a bona fide lapse. The company contended that the allegations relating to the mismatch between GSTR-1 and GSTR-3B, excess availment of input tax credit, and short payment of GST could be properly explained if an opportunity were granted to place materials before the authority.

Taking note of the fact that the order had been passed without considering any reply and that a substantial amount had already been recovered, the Court held that it would be appropriate to provide the petitioner an opportunity to present its case.

The court therefore set aside the order and remitted the matter to the stage of filing a reply to the show cause notice. The High Court directed the petitioner to appear before the authority on the specified date and clarified that all contentions of both sides would remain open for adjudication.

The court further ordered that the attachment of the petitioner's bank account be rescinded within one week, while observing that the amount already recovered would remain subject to the outcome of the fresh adjudication proceedings.

For Appellant: Advocate Y.C. Shivakumar

For Respondent: Advocate Akash Shetty