2025 (5) TMI 1973 - HC - GST

Statutory Notice Invalidated: Electronic Service Deemed Inadequate Without Confirmed Receipt of Communication

M/s. Two Twenty Software Technologies Versus State Of Karnataka, Assistant Commissioner Of Commercial Taxes, Bengaluru, Kotak Mahindra Bank.

HC set aside an ex-parte order under CGST/KGST Act due to improper service of statutory notices. The court found electronic communication via email ... Violation of principles of natural justice - non-service of Form GST ASMT-10 and show-cause notice in Form GST DRC-01 - ex-parte order - HELD THAT:- Though several contentions have been urged by both sides as regards to the petitioner not having received the Form GST ASMT-10 notice and show-cause notice and his inability and omission to contest the proceedings, is a matter on record and an undisputed fact that the petitioner did not submit his reply to the show-cause notice nor contested the proceedings, which culminated in the impugned ex-parte order. Having regard to the specific assertion on the part of the petitioner that his inability and omission to submit replies and contest the proceedings was due to bona fide reasons, unavoidable circumstances and sufficient cause, it is deemed just and appropriate to adopt a justice oriented approach and provide one more opportunity to the petitioner by setting aside the impugned order dated 27.04.2024 and remitting the matter back to the second respondent for reconsideration of the matter afresh in accordance with law to the stage of petitioner submitting reply to the impugned show-cause notice. Petition allowed by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this petition are:a) Whether the impugned Order-in-Original dated 27.04.2024 passed under Section 73 of the CGST/KGST Act, 2017, confirming the tax demand, is liable to be quashed on grounds of non-service and non-communication of statutory notices to the petitioner;b) Whether the petitioner was deprived of an opportunity to submit replies or contest the proceedings due to non-receipt of statutory notices (Form GST ASMT-10 and show-cause notice in Form GST DRC-1), and if so, whether this omission constitutes sufficient cause to set aside the impugned order;c) Whether the petitioner is entitled to a fresh opportunity to respond to the show-cause notice and contest the demand in accordance with principles of natural justice;d) The validity and sufficiency of electronic communication (e-mail) of statutory notices as a mode of service under the CGST/KGST Act, 2017;e) The appropriate remedy and procedural course where statutory notices are allegedly not served or received, but the order is passed ex-parte.2. ISSUE-WISE DETAILED ANALYSISa) Validity of the Impugned Order under Section 73 of the CGST/KGST Act, 2017 in light of alleged non-service of statutory noticesRelevant legal framework and precedents: Section 73 of the CGST/KGST Act, 2017 deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or willful misstatement or suppression of facts. The procedural safeguards under the Act mandate issuance of a show-cause notice (Form GST DRC-1) and opportunity to the assessee to submit replies before passing an order confirming demand. Principles of natural justice require proper service of notices and opportunity to be heard.Court's interpretation and reasoning: The Court noted that the impugned order dated 27.04.2024 was passed ex-parte as the petitioner did not submit any reply to the show-cause notice or contest the proceedings. The petitioner contended non-receipt of the statutory notices, both electronically and physically, and thus inability to respond. The respondents asserted that notices were communicated electronically via e-mail, which they contended was sufficient service. The Court observed that the petitioner's claim of non-receipt was not disputed factually but that the petitioner failed to respond to the notices issued.Key evidence and findings: The record showed issuance of Form GST ASMT-10 on 29.11.2023 and Form GST DRC-01A on 01.12.2024, followed by a show-cause notice in Form GST DRC-1 dated 31.01.2024. There was no evidence on record that these notices were uploaded on the portal or physically served on the petitioner. The petitioner's counsel submitted that no physical or electronic communication was received. The respondents relied on electronic communication by e-mail.Application of law to facts: The Court recognized the importance of proper service of statutory notices to enable the petitioner to exercise the right to be heard. The absence of physical service or portal upload, combined with the petitioner's assertion of non-receipt, raised a question on adequacy of service. The Court balanced the respondents' claim of e-mail communication against the petitioner's denial of receipt and found that the petitioner's inability to respond was due to bona fide reasons and unavoidable circumstances.Treatment of competing arguments: The Court acknowledged the respondents' reliance on electronic communication as valid service but did not find it conclusive in the absence of proof of receipt by the petitioner. The petitioner's plea of non-receipt and consequent inability to file replies was accepted as sufficient cause to set aside the impugned order.Conclusions: The impugned ex-parte order passed under Section 73 was set aside on grounds of failure to provide effective notice and opportunity to the petitioner, thereby violating principles of natural justice.b) Entitlement of the petitioner to a fresh opportunity to respond and contest the proceedingsRelevant legal framework and precedents: The doctrine of natural justice and statutory provisions under the CGST/KGST Act require that an assessee be given an opportunity to be heard before passing an adverse order. Courts have consistently held that failure to provide such opportunity vitiates the order.Court's interpretation and reasoning: The Court considered the petitioner's submission that the omission to reply was due to bona fide reasons and unavoidable circumstances. It emphasized a justice-oriented approach and the need to provide a fair opportunity to the petitioner to submit replies and contest the demand.Key evidence and findings: The petitioner undertook to appear before the authority on a specified date without awaiting further notice, indicating willingness to cooperate and participate in the proceedings.Application of law to facts: The Court found it appropriate to remit the matter back to the second respondent for fresh consideration after allowing the petitioner to submit replies. It directed that the petitioner be given sufficient and reasonable opportunity to present additional pleadings and documents.Treatment of competing arguments: While the respondents opposed reopening the matter on grounds of procedural delay and electronic communication, the Court prioritized the petitioner's right to be heard and the need to avoid injustice.Conclusions: The petitioner was granted one more opportunity to respond to the show-cause notice and contest the proceedings, with the matter remitted for fresh adjudication in accordance with law.c) Validity and sufficiency of electronic communication as mode of serviceRelevant legal framework and precedents: The CGST/KGST Act permits electronic communication of notices, but service must be effective and verifiable. Courts require proof of delivery or acknowledgment to establish valid service.Court's interpretation and reasoning: The Court noted the respondents' contention that notices were sent by e-mail but observed that mere sending of e-mail does not conclusively establish receipt by the petitioner. The absence of portal upload or physical service further weakened the claim of valid service.Key evidence and findings: No evidence was produced by respondents to prove that the petitioner accessed or received the e-mails containing the notices.Application of law to facts: The Court held that in absence of proof of receipt, electronic communication cannot be deemed sufficient service to deprive the petitioner of the right to be heard.Treatment of competing arguments: The Court balanced the modern acceptance of electronic communication against the fundamental right to notice and hearing, favoring the latter where proof of receipt is lacking.Conclusions: Electronic communication of statutory notices must be accompanied by proof of receipt to constitute valid service; otherwise, it does not satisfy principles of natural justice.d) Appropriate remedy where statutory notices are not received and order is passed ex-parteRelevant legal framework and precedents: Judicial precedents emphasize that ex-parte orders passed without proper notice or opportunity to be heard are liable to be set aside and remanded for fresh consideration.Court's interpretation and reasoning: The Court found that the impugned order was passed ex-parte due to the petitioner's non-response, which was caused by non-receipt of notices. This constituted sufficient cause to set aside the order and remit the matter for fresh adjudication.Key evidence and findings: The petitioner's undertaking to appear and contest the proceedings was a positive factor in granting relief.Application of law to facts: The Court exercised its discretionary power to ensure justice by providing a fresh opportunity and setting aside the ex-parte order.Treatment of competing arguments: The respondents' argument of procedural finality was outweighed by the petitioner's right to be heard and the absence of effective notice.Conclusions: The appropriate remedy is to