Allahabad High Court Upholds Natural Justice in GST Dispute, Quashes Tax Demand and Appeal Rejection Orders

In the present case, the court did not even go into the full details of whether the tax demand was valid or not. Instead, it focused on procedural fairness, that the company should have been given a chance to present its case before the tax order was passed. Because this did not happen, the court quashed both the tax demand and the appeal rejection orders.

The writ petition (WRIT TAX No. 606 of 2025) is filed by a company named M/S Moringo Organics Private Limited, located in Lucknow. The petition was heard in Court No. 7 of the Allahabad High Court, Lucknow Bench. In the writ petition, the company is requesting the court to quash the order dated 09.04.2025 passed by the appellate authority that dismissed their appeal and the tax demand order dated 04.12.2023 passed by the assessing officer. Also, to send the case back to the First Appellate Authority for a fresh hearing and decide the matter based on facts. Asks the court to set aside two government notifications issued in 2022 and 2023 on the ground that they were not properly approved by the GST Council, as required by Section 168A of the GST Act. (But later, the petitioner said they are not pressing this point now and may raise it again in the future, depending on what the Supreme Court decides.) Alternatively, the company asked the court to directly look into and decide the tax demand order dated 04.12.2023 on its merits. Lastly, they wanted a stay on tax recovery until the case is completely decided and closed.

The company referred towards a similar case (SLP No. 4240 of 2025) already discussed in the Supreme Court (titled M/s HCC-SEW-MEIL-AAG JV v. Assistant Commissioner of State Tax & Others). Also, distinct High Courts such as Allahabad and Telangana vs. Gauhati have taken conflicting views on similar matters, and now the Supreme Court will decide which interpretation is correct.

On the issuance of the tax demand order dated 04.12.2023, the petitioner argued that they were not awarded the opportunity of a hearing before passing the order, which is a violation of Section 75(4) of the GST Act, which clearly says a taxpayer must be given a fair chance to present their side before any such order is made. The petitioner took reference from an earlier judgement (Writ Tax No. 303 of 2024) titled Mahaveer Trading Company vs. Deputy Commissioner, related to the same matter, where the petitioner was not given a fair chance of hearing; hence, the court declared the orders as invalid. The company also challenged the order dated 09.04.2025, where their appeal was filed beyond the legal time limit as per the law.

When the court examined the entire matter, it discovered that since the appeal was dismissed as being time-barred, it does not lead to the “doctrine of merger.” Regarding the tax demand order dated 04.12.2023, the court clearly saw that no hearing or notice was given to the petitioner before the order was passed, which is a clear violation of natural justice. The respondent also could not deny this. Hence, based on its earlier judgment in the Mahaveer Trading Company case, the High Court decided to partly allow the petition.

The Court, in its final ruling, quashed both the tax demand order dated 04.12.2023 and the appeal dismissal order dated 09.04.2025. Remand the case back to the assessing authority for a fresh hearing. The assessing officer is directed to pass a fresh order but only after giving the petitioner a proper opportunity of hearing, as per the law.