Unjustified Silence: Allahabad HC Strikes Down Ex-Parte GST Orders for Lack of Notice

In a significant ruling for taxpayers, the Allahabad High Court has reaffirmed that procedural integrity is the bedrock of quasi-judicial proceedings under the Goods and Services Tax (GST) regime. Justice Ajit Kumar, presiding over the case of M/S Akriti Food Industry LLP v. State of UP , underscored that failing to serve a show-cause notice (SCN) through the prescribed GST portal renders an assessment order fundamentally flawed.

The Backdrop of the Dispute

The petitioner, a Limited Liability Partnership (LLP) involved in food manufacturing, found itself at the receiving end of an ex-parte assessment order by the tax authorities. The department had imposed a tax liability, along with interest and penalties, under Section 73 of the GST Act, 2017.

The core of the grievance was entirely procedural: the petitioner claimed the Show Cause Notice (GST DRC-01A) was neither physically served nor reflected on the designated "view additional notices and orders" dashboard of the GST portal. Consequently, the firm was effectively blindsided, unable to submit a response or defend its claimed exemptions. By the time the firm discovered the order—already passed—the statutory window for filing an appeal had expired, leaving the business without a remedy.

Arguments: The Right to be Heard

Representing the petitioner, the counsel argued that the ex-parte order was a violation of the principle of audi alteram partem (no one should be condemned unheard). The argument centered on the fact that without the notice properly appearing on the portal, the petitioner was never granted the opportunity to contest the tax liability.

The petitioner relied heavily on the precedent set in Ola Fleet Technologies Pvt. Ltd. v. State of U.P. , where the court previously held that if a taxpayer does not see a notice on the official portal, they cannot be held responsible for failing to respond. The State, conversely, maintained the legitimacy of its assessment process, though the Court ultimately found the argument lacking.

The Judicial Verdict and Reasoning

Justice Ajit Kumar’s judgment serves as a stern reminder that statutory procedures are not mere suggestions. Drawing upon the principle laid down in Sharif-Ud-Din v. Abdul Gani Lone (1980) , the Court noted that when a statute prescribes a specific manner for an act to be done, failure to follow that manner invalidates the act entirely.

The Court held that any violation of procedural rules leads to an "inherent defect" in the decision-making process. "If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner [it] has no existence in the eye of the law," the Court remarked, citing Tata Chemicals Limited v. Commissioner of Customs .

Key Observations

The judgment clarifies that the judiciary will not favor administrative efficiency at the expense of fairness:

> "The court is of the considered view that statutes provide procedure... to ensure that orders are not passed by the authorities whimsically, more especially where the authorities exercise power which is quasi judicial in nature."

> "As and when mandatory requirement of law is not taken care of in the matter of compliance of procedure... it becomes inherent defect in the decision making process which cannot be cured at a later stage."

> "Any subsequent reminder will not cure inherent defect in proceedings initiated against the petitioner."

Looking Ahead

The High Court has quashed the rigidity of the previous assessment process by directing that the original assessment order of December 11, 2023, be treated as a formal show-cause notice. The petitioner has been granted eight weeks to submit their objections and documents. The assessing officer is now mandated to provide a fresh hearing and pass a reasoned order within four weeks thereafter.

This ruling stands as a safeguard for businesses, ensuring that the digitised tax portal remains a bridge for communication rather than a barrier to justice. It reinforces the expectation that tax authorities must act with transparency, ensuring that every taxpayer is given a fair chance to present their case before being penalized.