2025 (7) TMI 392 - HC - GST

GST order quashed for improper service of show cause notice under Section 169 CGST Act

Tvl. Vels Film International Versus Deputy Commercial Tax Officer (ST), Chennai

Madras HC quashed GST order passed without proper service of show cause notice. The SCN was only uploaded on GST Portal without physical service, ... Seeking to quash order passed by the Respondent - non-service of SCN - SCN was only uploaded in the GST Portal Tab “View Additional Notices and Order” and the same was not served to the petitioner through physical mode - petitioner was not aware of the SCN, the petitioner could not file any reply to the Show Cause Notice - HELD THAT:- From a perusal of the materials available on record, it is seen that the Show Cause Notice dated 27.12.2023 which culminated in the impugned order dated 29.04.2024 was merely uploaded in the GST Portal and the same was not served to the petitioner through any other physical mode. Since the petitioner was not aware of the show cause notice uploaded in the GST Portal, the petitioner could not reply to the show cause notice. No doubt, sending notice by uploading in GST Portal is a sufficient service, but, the Officer who finds no response from the petitioner to the show cause notices should have applied his/her mind and explored the possibility of sending notices by way of other modes prescribed in Section 169 of the Central Goods and Service Tax Act, 2017 which are also the valid mode of service under the said Act, otherwise, the service of notice will not be deemed to be an effective service, rather, it would only fulfilling the empty formalities - Merely passing an ex-parte order by fulfilling the empty formalities will not serve any useful purpose and the same would pave way for multiplicity of litigations, not only wasting the time of the Officer concerned, but also the precious time of the Appellate Authority/Tribunal and this Court as well. Thus, when there is no response from the tax payer to the notice sent through a particular mode, the Officer who is issuing notices should strictly explore the possibilities of sending notices through some other mode as prescribed in Section 169(1) of the CGST Act, preferably by way of RPAD which would ultimately achieve the object of the CGST Act. This Court is of the opinion that the impugned order suffers from violation of principles of natural justice and further, the respondent has passed the impugned order without application of mind. Once the order is passed in violation of the principles of natural justice, this Court cannot impose any condition requiring the petitioner to make any deposit. The impugned order passed by the respondent is quashed - the case is remanded back to the respondent for fresh consideration - Petition allowed by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter are:Whether the service of the Show Cause Notice dated 27.12.2023 by mere uploading on the GST Portal without physical service satisfies the requirement of effective service under the CGST Act, 2017;Whether the impugned Order dated 29.04.2024, confirming tax demands without affording the petitioner an opportunity to be heard, violates the principles of natural justice;Whether the respondent authority failed to apply its mind by passing the impugned order without considering the petitioner's reply to a related Show Cause Notice dated 31.01.2024 and the subsequent rectification order dated 30.07.2024;Whether the impugned order suffers from non-application of mind and is liable to be quashed and remanded for fresh consideration in accordance with law.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Service of Show Cause Notice by Uploading on GST Portal AloneRelevant legal framework and precedents: Section 169 of the Central Goods and Services Tax Act, 2017 (CGST Act) prescribes the modes of service of notices, which include electronic modes as well as physical modes such as Registered Post with Acknowledgment Due (RPAD). The Court recognized that while uploading notices on the GST Portal is a valid mode of service, it is not the sole mode prescribed.Court's interpretation and reasoning: The Court observed that mere uploading of the Show Cause Notice on the GST Portal without any physical service does not amount to effective service if the recipient is unaware of the notice. The Court emphasized that effective service requires that the recipient must have knowledge of the notice to enable them to respond.Key evidence and findings: The petitioner demonstrated that the Show Cause Notice dated 27.12.2023 was only uploaded on the GST Portal under the 'View Additional Notices and Order' tab and was not served through any physical mode. Consequently, the petitioner was unaware of the notice and did not file any reply.Application of law to facts: The Court held that the respondent authority should have explored alternative modes of service as prescribed under Section 169(1) of the CGST Act, such as RPAD, especially when no response was received from the petitioner. Failure to do so rendered the service ineffective.Treatment of competing arguments: The respondent did not dispute the mode of service but prayed for quashing the impugned order and remanding the matter for reconsideration, implicitly conceding procedural lapses.Conclusions: The Court concluded that the service of the Show Cause Notice by uploading alone was insufficient and violated the requirement of effective service under the CGST Act.Issue 2: Violation of Principles of Natural Justice Due to Passing of Ex-Parte OrderRelevant legal framework and precedents: The principles of natural justice mandate that a person should be given an opportunity to be heard before any adverse order is passed against them. This is a fundamental tenet in administrative and tax proceedings.Court's interpretation and reasoning: Since the petitioner was unaware of the Show Cause Notice and hence could not file any reply, the passing of the impugned order without affording an opportunity of hearing was held to be a violation of natural justice.Key evidence and findings: The petitioner's inability to respond to the Show Cause Notice due to lack of proper service was a critical fact. Furthermore, the petitioner had filed replies and rectification applications to a related Show Cause Notice dated 31.01.2024, which was not considered before passing the impugned order.Application of law to facts: The Court applied the principle that an ex-parte order passed without proper notice and hearing is liable to be set aside. The procedural lapse in service and non-consideration of the petitioner's submissions amounted to denial of natural justice.Treatment of competing arguments: The respondent did not contest the natural justice violation but sought remand, which the Court accepted.Conclusions: The impugned order was passed in violation of natural justice and was therefore liable to be quashed.Issue 3: Non-Application of Mind and Overlapping Proceedings for the Same Financial YearRelevant legal framework and precedents: Administrative orders must be passed after due application of mind, considering all relevant facts and submissions. Multiplicity of proceedings on the same cause of action or facts should be avoided to prevent inconsistent orders and harassment.Court's interpretation and reasoning: The Court noted that the petitioner had already responded to a Show Cause Notice dated 31.01.2024 for the same Financial Year 2018-19, explaining the discrepancy in Input Tax Credit due to payment under IGST instead of CGST and SGST. The Assistant Commissioner had initially confirmed the demand but later rectified the order reducing the demand.Key evidence and findings: The existence of two Show Cause Notices for the same financial year and similar issues, the petitioner's reply to the later notice, and the rectification order reducing the demand were all critical facts.Application of law to facts: The Court found that the impugned order dated 29.04.2024 was passed without considering the petitioner's submissions and the rectification order dated 30.07.2024, indicating non-application of mind and procedural unfairness.Treatment of competing arguments: The respondent did not dispute the factual matrix but sought remand for reconsideration.Conclusions: The impugned order suffered from non-application of mind and was liable to be set aside and remanded for fresh consideration.3. SIGNIFICANT HOLDINGSThe Court held:'No doubt, sending notice by uploading in GST Portal is a sufficient service, but, the Officer who finds no response from the petitioner to the show cause notices should have applied his/her mind and explored the possibility of sending notices by way of other modes prescribed in Section 169 of the Central Goods and Service Tax Act, 2017 (for brevity, 'CGST Act') which are also the valid mode of service under the said Act, otherwise, the service of notice will not be deemed to be an effective service, rather, it would only fulfilling the empty formalities.''Merely passing an ex-parte order by fulfilling the empty formalities will not serve any useful purpose and the same would pave way for multiplicity of litigations, not only wasting the time of the Officer concerned, but also the precious time of the Appellate Authority/Tribunal and this Court as well.''Considering the above facts and circumstances of the case, this Court is of the opinion that the impugned order suffers from violation of principles of natural justice and further, the respondent has passed the impugned order without application of mind.'Core principles established include:Effective service of notices under the CGST Act requires more than mere uploading on the GST Portal when the recipient does not respond; alternative modes of service must be explored.Passing of ex-parte orders without affording an opportunity to be heard violates principles of natural justice and renders such orders liable to be quashed.Authorities must apply their mind to all relevant facts and submissions, especially when multiple proceedings relate to the same financial year and issues, to avoid inconsistent orders and unnecessary litigation.Final determinations:The impugned Order dated 29.04.2024 was quashed for violation of natural justice and non-application of mind.The matter was remanded to the respondent for fresh consideration after proper service of notice and affording the petitioner an opportunity of hearing.The petitioner was directed to file their reply within three weeks, and the respondent was directed to issue a 14-day clear notice for personal hearing before passing a fresh order.