The High Court of Chhattisgarh has granted critical relief to Korba Steel Castings, a proprietorship firm, by permitting it to file a statutory appeal against an ex parte tax assessment order despite the expiry of the statutory limitation period . The ruling, delivered by Justice Narendra Kumar Vyas, provides the petitioner a procedural lifeline, conditioned upon the deposit of 50% of the assessed tax liability. The decision serves as a significant intervention, balancing the department’s tax collection mandates with the fundamental requirements of natural justice .

The litigation originated from an ex parte assessment order dated December 13, 2023 , issued by the State Tax Officer of Korba Circle-II . Under this order, the tax authorities imposed a total liability of ₹8,17,771.69, encompassing both the principal tax amount and associated penalties. The petitioner, represented by counsel, contended that the entire assessment process was fundamentally flawed, alleging that the respondent authorities failed to issue the mandatory show cause notice required under the Goods and Services Tax (GST) Act of 2017 . Furthermore, the petitioner claimed that the authorities bypassed the procedural safeguards outlined in Sections 61, 73, and 169 of the Act, which are essential for maintaining transparency and ensuring the taxpayer is adequately informed of proceedings.

The discovery of the tax liability came as a shock to the firm. According to the petition, the proprietor, Surendra Nath Sharma, only became aware of the ex parte order after the respondent authorities issued a separate notice under Section 79(1)(c) of the GST Act to the firm’s supplier, M/s Maruti Aluminum Foil & Sheets. This third-party notice demanded that the supplier redirect funds payable to the petitioner toward the satisfaction of the alleged tax debt, effectively freezing the petitioner’s business operations and interfering with its commercial relationships.

Procedural Challenges and Judicial Intervention

During the hearing, the State counsel vehemently opposed the petition, arguing that the taxpayer had been granted multiple opportunities to respond to the proceedings. The State maintained that the petitioner’s failure to reply to earlier communications rendered the assessment valid and binding, asserting that the statutory limitation period for filing an appeal had lapsed, thereby barring any further legal recourse under the GST framework.

Justice Narendra Kumar Vyas, however, weighed these arguments against the necessity of ensuring a fair hearing. Recognizing the severity of the situation, the Court invoked its expansive jurisdiction under Article 226 of the Constitution of India . In justifying the intervention, the Court stated, "thus, a case for interference by this Court to exercise its power conferred under Article 226 of the Constitution of India to do complete justice between the parties is made out."

The Court’s order acknowledges the dual necessity of protecting the public exchequer and preserving the right of the individual to contest administrative decisions. By mandating a 50% deposit of the total liability, the High Court ensured that the interests of the State were secured while simultaneously enabling the petitioner to seek a merits-based review before the appropriate appellate forum.

Resolving the Impasse through Conditional Relief

The operative portion of the order grants the petitioner a one-month window from the receipt of the judgment to initiate the statutory appeal process. Notably, the High Court explicitly directed the appellate authority to overlook the delay in filing, effectively condoning the lapse in the interest of justice. The condition precedent for this relief is the payment of ₹4,08,885.84, which constitutes 50% of the total assessed liability.

The Court’s directive clarifies that once this deposit is made, the appellate authority must proceed with a substantive examination of the matter. Justice Vyas further underscored that the petitioner retains the full liberty to raise all available legal defenses, including the core contention that the ex parte nature of the initial assessment order was an illegal, procedurally improper exercise of authority.

"It is also made clear that the petitioner is at liberty to take all the defense available to him under the law including passing of the ex parte order before the appellate authority who in turn shall decide the same in accordance with law," the order stated.

This decision highlights the Judiciary's role in oversight regarding administrative actions under the GST regime. By enforcing the payment of a significant portion of the disputed tax, the Court ensured that the process remained within the bounds of fiscal discipline while preventing an irreparable injustice resulting from an order passed without the taxpayer’s knowledge or participation. The case now shifts to the appellate stage, where the merits of the underlying tax demand will be formally scrutinized. The immediate consequence for the petitioner is the requirement to secure the funds and file the appeal promptly to prevent further recovery actions against its third-party suppliers.