Ex parte GST demand u/s73 after missed show-cause reply, orders set aside for fresh hearing on merits

The dominant issue was whether ex parte confirmation of GST demand with interest and penalty under s.73 CGST/KGST Act could stand where the assessee failed to reply to the show-cause notice and sought a further opportunity. The HC accepted the assessee's specific plea of bona fide inability and unavoidable circumstances constituting sufficient cause, and adopted a justice-oriented approach to ensure adjudication on merits. Consequently, the adjudication order and the appellate order under s.107 CGST/SGST Act were set aside and the matter remitted to the adjudicating authority to reconsider from the stage of filing reply to the show-cause notice, subject to payment of costs to the HC Legal Services Authority.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the assessment order passed under Section 73 confirming demand, and the appellate order dismissing the appeal as time-barred, should be set aside and the matter remitted, when the assessee asserts inability to reply to the show-cause notice due to "bonafide reasons, unavoidable circumstances and sufficient cause".

(ii) Whether the Court should grant a "justice oriented approach" by providing one further opportunity to respond to the show-cause notice, and if so, on what conditions and safeguards.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Setting aside Section 73 adjudication order and the time-bar dismissal order, and remand for fresh consideration

Legal framework (as discussed): The Court considered that proceedings had culminated in an order under Section 73 after issuance of a show-cause notice, and that an appeal under Section 107 was dismissed as barred by limitation.

Interpretation and reasoning: The Court noted from the record that a show-cause notice had been issued and that the assessee did not submit a reply, leading to confirmation of demand comprising tax, interest, and penalty. The Court accepted the petitioner's specific assertion that the omission to respond and contest the proceedings was due to "bonafide reasons, unavoidable circumstances and sufficient cause". On that basis, the Court considered it appropriate to adopt a "justice oriented approach" and grant one more opportunity to participate in the adjudication at the stage of replying to the show-cause notice, rather than allowing the adverse order to stand.

Conclusions: The Court set aside both the adjudication order under Section 73 and the appellate order dismissing the appeal as time-barred, and remitted the matter to the adjudicating authority for reconsideration afresh from the stage of filing reply to the show-cause notice.

Issue (ii): Conditions for granting further opportunity and procedural safeguards

Legal framework (as discussed): The Court exercised discretion to impose costs and to issue directions ensuring timely participation and orderly reconsideration by the adjudicating authority.

Interpretation and reasoning: While granting a further opportunity, the Court balanced equities by making the relief conditional upon payment of costs to the High Court Legal Services Authority. The Court also ensured expeditious continuation of proceedings by directing the assessee to appear on a specified date without waiting for further notice. To prevent misuse of the indulgence, the Court provided that non-appearance on the fixed date would result in automatic recall of the order. The Court further directed that replies/documents submitted by the assessee be considered and that a sufficient and reasonable opportunity of hearing be provided before proceeding in accordance with law.

Conclusions: Relief was granted subject to payment of costs of Rs.15,000/-, appearance before the adjudicating authority on the specified date, consideration of replies/documents with reasonable opportunity of hearing, and an automatic recall consequence upon default of appearance.

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