GST: Madras HC Quashes Ex Parte Assessment, Orders Fresh Hearing and Bank Defreeze

The Madras High court has given relief to a petitioner company, which failed to reply to the notices served to the company on the GST portal. The company, Saravanan Control Systems, received a show cause notice on 20.07.2024 followed by other reminders dated 27.01.2025, 30.01.2025 and 03.02.2025 on the GST portal. Now since the notices were only issued on the portal and no physical copies were served to the company, it could not respond to the show cause notice. This resulted in passing the ex parte order by the state tax officer. Therefore, the petitioner filed a writ petition in the Madras High Court to challenge the final order.

The company claimed that the final order was passed without giving an opportunity for a personal hearing to the company, which violated the principles of natural justice. The company stated that if the final order, which violates natural justice, is set aside by the High Court, the company will pay 25% of the disputed tax. He also requested the court to give direction to unfreeze the bank account, which was frozen, subject to the deposit of 25% of the disputed tax amount.

The Madras High Court observed that while uploading a notice on the GST portal is legally valid, it may not be effective if there is no response from the taxpayer. In such cases, the officer should apply his mind and use other modes of communication as allowed under Section 169(1) of the GST Act, such as sending notices by way of RPAD (Registered Post Acknowledgement Due). The court also noted that the final order was passed without giving a chance to be heard to the petitioner.

Therefore, the High Court Quashed the order dated 30.09.2024 passed by the state tax officer, and the matter is remanded to the tax officer for fresh consideration. The court allowed the company to pay 25% of the disputed tax within two weeks. The company was directed to submit its reply along with the necessary documents within two weeks. Accordingly, the tax officer is also directed to issue a 14 days notice after considering the reply of the company and giving them an opportunity for a personal hearing. After which, the officer must pass the final order.

The court also directed the manager of the bank to defreeze the company’s bank account after the company shows proof of payment of 25% of the disputed tax.