Personal Hearing Mandatory Once Requested in GST Proceedings: Orissa HC

The High Court of Orissa, in the case of Janardan Panda vs. The Commissioner, Commercial Tax & GST, Odisha and Others [WP(C) No.11297 / 2026], delivered its judgment on May 14, 2026. The Court set aside the adjudication and rectification orders passed under Sections 73 and 161 of the GST Act after finding a clear violation of principles of natural justice and non-consideration of the taxpayer’s reply to the show cause notice.

“Reply to show cause notice cannot be said to be empty formality or useless lumber.”

The petitioner challenged the Order-in-Original dated December 26, 2025 passed under Section 73 of the CGST/OGST Act for FY 2021-22, along with the rectification order dated January 6, 2026 passed under Section 161, through which tax, interest and penalty amounting to Rs.57.30 lakh were demanded. The dispute primarily related to GST liability under reverse charge mechanism on royalty, DMF, EMF, dead rent and surface rent connected with mining operations.

Before the High Court, the petitioner submitted that a detailed reply to the show cause notice in Form GST DRC-06 had already been filed on September 17, 2025. In the said reply, the petitioner had specifically opted for personal hearing and contended that no taxable event had occurred during the relevant period as mining activities had not commenced. However, despite the reply being on record, the adjudicating authority incorrectly recorded in the order that the petitioner neither replied to the notice nor appeared for personal hearing.

The Department defended the demand by arguing that tax on royalty under reverse charge mechanism was legally recoverable and that disputed factual issues should be adjudicated before the appellate authority under the statutory remedy available under the GST Act.

The Bench observed that the adjudicating authority had adopted a “manifestly erroneous approach” by proceeding as though no reply had been filed by the taxpayer despite the reply being available on record.

The Court further noted that although the authority later invoked Section 161 and passed a rectification order acknowledging receipt of the reply, even the rectification proceedings were conducted without granting any opportunity of hearing to the petitioner. The Bench held that the adjudicating authority mechanically proceeded with adjudication without independently considering the objections raised in the reply to the show cause notice.

The Court emphasized that even in absence of appearance by the taxpayer, the adjudicating authority is duty-bound to apply its mind and assign reasons while rejecting the explanation furnished in reply to the show cause notice.

Holding that the impugned orders suffered from blatant violation of principles of natural justice and non-application of mind, the High Court quashed both the adjudication order passed under Section 73 and the rectification order under Section 161. The matter was remanded back to the adjudicating authority for fresh adjudication after granting reasonable opportunity of hearing to the petitioner and permitting him to adduce evidence in support of his case.

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