CGST s.73 tax recovery challenged for no hearing and non-speaking adjudication order; recovery and consequential orders quashed

Recovery proceedings under s.73 of the CGST Act were challenged on the ground that the adjudication order was passed without granting any opportunity of hearing and without application of mind. Applying the coordinate Bench ruling that a non-speaking order lacking due consideration fails the Article 14 test and violates principles of natural justice, the HC held that such an order cannot be sustained. Consequently, the impugned recovery order and the consequential order were quashed and set aside, and the writ petition was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1) Whether the recovery order under Section 73 of the GST Act, 2017 was liable to be set aside on the ground that it was passed without granting the petitioner an effective opportunity of hearing and/or without application of mind, thereby failing to satisfy the test of Article 14 of the Constitution of India.

2) Whether, despite dismissal of the statutory appeal as barred by limitation (with no power of condonation), the Court should quash both the recovery order and the appellate order and direct a fresh adjudication, and if so, on what conditions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the recovery order under Section 73 on grounds of opportunity of hearing / application of mind and Article 14

Legal framework (as discussed by the Court): The Court examined the impugned recovery order under Section 73 of the GST Act, 2017 and assessed it on the constitutional touchstone of Article 14, expressly stating that an order "without any application of mind" does not satisfy the test of Article 14.

Interpretation and reasoning: The Court considered the petitioner's grievance that no opportunity of hearing was granted and the State's response that an opportunity was granted but not availed. Upon perusal of the material on record, the Court treated the matter as covered by the approach taken in a similar situation by a coordinate Bench, focusing on whether the order reflects application of mind and satisfies constitutional standards. The Court recorded its conclusion that the impugned order suffered from lack of application of mind and therefore could not be sustained under Article 14.

Conclusion: The Court held that the recovery order dated 25.04.2024, being without application of mind and failing the Article 14 test, was liable to be set aside.

Issue 2: Effect of limitation-barred appeal and scope of relief; quashing of both orders with conditional remand

Legal framework (as discussed by the Court): The Court proceeded on the basis that the appellate authority dismissed the appeal as beyond limitation and that the appellate authority had no power to condone delay. The Court nonetheless evaluated whether the foundational adjudication could stand, and fashioned relief by directing fresh consideration by the original authority after compliance with specified conditions.

Interpretation and reasoning: The Court accepted that, irrespective of the limitation position before the appellate authority, the primary order could not be sustained once found to be vitiated (for want of application of mind/constitutional infirmity). Consequently, the appellate order, which merely dismissed the appeal as time-barred and left the defective foundational order intact, also could not stand once the foundational order was set aside. To balance equities and ensure participation in the adjudication, the Court imposed a condition requiring deposit of a specified sum along with submission of reply to the show cause notice within a fixed timeframe, and directed the authority to pass a fresh order after affording opportunity of hearing.

Conclusion: The Court quashed both the recovery order dated 25.04.2024 and the appellate order dated 18.02.2025, and directed fresh adjudication by the competent authority after affording opportunity to the parties, subject to the petitioner depositing Rs. 2,00,000/- and filing reply within three weeks; failing such deposit, the petitioner would not be entitled to the benefit of the Court's order.

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