2026 (3) TMI 1141 - HC - GST

Natural Justice requirement: ex parte GST demand set aside for failure to serve show cause notice; fresh adjudication after hearing.

An ex parte notice under Section 73 demanding reversal of input tax credit, interest and penalty was set aside because there is no record of effective ... Validity of the ex-parte order passed without evidence of physical service of the show cause notice and without giving the petitioner an opportunity to be heard - cancellation of registration - reversal of input tax credit - interest and penalty.HELD THAT:- The Court found that the petitioner's GST registration had been cancelled w.e.f. 09.11.2022 and there was no material on record to show that the cancellation was recalled or that any physical/offline show cause notice had been served prior to passing the impugned ex-parte order. In the absence of evidence that the petitioner had actual knowledge of the notice, issuance of the show cause notice through electronic mode long after cancellation and passing an ex-parte order amounted to failure to afford the petitioner an opportunity to defend herself, thereby violating the principles of natural justice. The Court set aside the ex-parte order and directed that the petitioner be permitted to submit a reply/clarification within three weeks and that the adjudicating authority shall pass a fresh order after affording opportunity in accordance with law. [Paras 6, 7] The impugned ex-parte order is set aside; petitioner to file reply within three weeks and respondent to decide afresh after affording opportunity to be heard. Final Conclusion: The High Court set aside the ex-parte order for lack of service and denial of opportunity to be heard, and remanded the matter for fresh adjudication after permitting the petitioner to file a reply within three weeks. Issues: Whether the ex-parte order dated 22.12.2023 passed under Section 73 of the Meghalaya Goods and Services Tax Act, 2022 demanding reversal of input tax credit, interest and penalty can be sustained where the petitioner was not served with the show cause notice and was not afforded an opportunity of hearing.Analysis: The petitioner's GST registration was cancelled with effect from 09.11.2022 and there is no material on record showing revival of registration. The impugned order was passed ex-parte on 22.12.2023 under Section 73 of the Meghalaya Goods and Services Tax Act, 2022. The Court examined whether service of the show cause notice was effected in a manner ensuring actual knowledge and whether the petitioner was afforded an opportunity to defend herself. In the absence of any record of physical or other effective service prior to passing the ex-parte order, and given that the petitioner pleads she was unaware of the notice until contacted in April 2025, the requirements of natural justice-specifically the right to be heard-were not satisfied. The respondents are correct that cancellation of registration does not extinguish pre-cancellation liabilities, but that principle does not obviate the statutory requirement to afford a hearing before imposing liability. Accordingly, the ex-parte order is vulnerable for want of compliance with the principles of natural justice and must be set aside to enable fresh adjudication after affording opportunity of hearing.Conclusion: The ex-parte order dated 22.12.2023 is set aside and the petitioner is entitled to an opportunity to file reply/clarification; the matter is remitted for fresh adjudication after affording hearing - decision in favour of the assessee.