Ex-parte GST Section 63 order quashed for non-service of notice, fresh adjudication allowed with full hearing

HC held that the ex-parte adjudication order passed under Section 63 of the GST Act was vitiated by violation of principles of natural justice. The authority failed to ensure proper service of the SCN on the petitioner, who had become an unregistered person under the GST regime, resulting in deprivation of opportunity to be heard and to produce relevant material. The HC set aside the adjudication order dated 03.02.2022 and directed the petitioner to appear before the competent authority by a specified date. The authority was directed to conduct fresh adjudication, permitting the petitioner to file objections, explanations and raise all legally available contentions. The petition was disposed of accordingly.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether an ex parte adjudication order under Section 63 of the GST Act, passed against an unregistered person, is vitiated for violation of principles of natural justice due to non-effective service of show cause notice.

1.2 Whether the existence of an alternative statutory remedy bars exercise of writ jurisdiction when the assessee alleges deprivation of opportunity of hearing in the adjudication proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of ex parte adjudication under Section 63 of the GST Act in absence of effective service of show cause notice

Legal framework

2.1 The adjudication was initiated and concluded under Section 63 of the Central Goods and Services Tax Act / Odisha Goods and Services Tax Act, 2017 against a person treated as an "unregistered taxpayer".

Interpretation and reasoning

2.2 The Court noted from the record that the tax authority had acknowledged cancellation of the petitioner's GST registration with effect from 01.07.2017, thereby treating the petitioner as an unregistered taxpayer for the relevant period.

2.3 It was undisputed that the show cause notice dated 04.12.2021 was stated to have been served only via an e-mail address earlier furnished during the pre-GST (VAT) regime, when the petitioner was a registered dealer.

2.4 The petitioner's contention that such e-mail address had remained inactive and non-operational after 01.07.2017 was recorded, along with the assertion that the notice never actually reached him.

2.5 Without finally adjudicating on the factual controversy of the e-mail account's operational status, the Court focused on the consequence that the petitioner did not participate in the proceedings under Section 63 and remained unaware of the initiation of adjudication.

2.6 The Court held that, in these circumstances, it was incumbent upon the Adjudicating Authority to verify whether the show cause notice had in fact reached the addressee, particularly when the person was being proceeded against as an unregistered taxpayer and did not appear on the date fixed.

2.7 As the adjudicating authority proceeded ex parte and determined tax liability under Section 63 in the petitioner's absence, the Court found that the petitioner had been deprived of an opportunity of hearing and of producing materials before the authority.

Conclusions

2.8 The ex parte adjudication order dated 03.02.2022 passed under Section 63 of the GST Act was set aside on the ground of violation of principles of natural justice and absence of effective opportunity to respond to the show cause notice.

2.9 The matter was remitted to the Adjudicating Authority, with directions to permit the petitioner to appear, file explanation or reply to the show cause notice, raise all legally available contentions, and for the authority to conclude the proceedings within three months from the petitioner's appearance.

Issue 2: Effect of alternative remedy in the context of alleged denial of opportunity of hearing

Interpretation and reasoning

2.10 The State contended that the petitioner ought to have availed the alternative statutory remedy to challenge the adjudication order and could not invoke writ jurisdiction directly.

2.11 The petitioner asserted that he had not been served with the show cause notice in a meaningful or effective manner and remained in the dark about the adjudication proceedings, as the notice was sent to an inactive e-mail address used during an earlier tax regime.

2.12 The Court accepted that the petitioner had been deprived of a reasonable opportunity of hearing in the adjudication under Section 63, and therefore treated the matter as one involving violation of principles of natural justice.

Conclusions

2.13 The existence of an alternative remedy did not preclude exercise of writ jurisdiction in the given facts, since the adjudication order was passed ex parte in violation of natural justice, warranting interference and remand for fresh adjudication after hearing the petitioner.

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