A Second Chance: Delhi HC Overturns Ex-Parte GST Demand for Elderly Proprietor

In a significant move reinforcing the tenets of natural justice, the High Court of Delhi has set aside an ex-parte GST demand order passed against an elderly taxpayer. The Court’s decision underscores the judiciary's commitment to ensuring that even in the face of procedural delays and medical hardships, the fundamental right to a fair hearing remains paramount.

The Backdrop: A Silence Born of Illness

The petitioner, M/s Ganga Enterprises , managed by 75-year-old widow Mrs. Chakresh Jain, faced a staggering tax demand of over Rs 97 lakh for the financial year 2019-2020. The dispute arose following a comparison between GSTR-1 and GSTR-3B returns, which led the Assistant Commissioner of the CGST, Delhi East Commissionerate, to issue a Show Cause Notice (SCN).

Despite multiple reminders and notices for personal hearings issued between July and August 2024, the petitioner remained silent. Consequently, the authorities passed an order-in-original confirming the demand along with penalties. It was later revealed that the sole proprietor had been suffering from an "acute kidney condition" since 2022, which incapacitated her from responding to the tax authorities in time.

Arguments at the Bar

The petitioner approached the High Court, seeking leniency and a chance to contest the demands on their merits. Counsel for the petitioner highlighted the health crisis faced by the proprietor as the primary reason for the default.

The Revenue, represented by the Assistant Commissioner, maintained that the petitioner had been duly served with repeated notices and failed to avail of the opportunities provided, thus justifying the ex-parte nature of the order.

The Judicial Intervention

The Delhi High Court, led by Justices Prathiba M. Singh and Shail Jain, examined the proportionality of the recovery action. Referencing its recent decision in Sugandha Enterprises v. Commissioner Delhi Goods And Service Tax , the Bench observed that passing an order in such circumstances without a substantive reply from the taxpayer deprived the individual of a fair opportunity to present their case.

The Court held that while procedural discipline is necessary in tax matters, rigid adherence should not come at the cost of denying a person their right to be heard due to genuine medical emergency.

Key Observations

The judgment is marked by the Court’s emphasis on the need for merits-based adjudication:

> "This Court is of the opinion that since the Petitioner has not been afforded an opportunity to be heard and the said SCN and the consequent impugned order have been passed without hearing the Petitioner, an opportunity ought to be afforded to the Petitioner to contest the matter on merits."

> "However, considering that the Petitioner firm was duly served with the notices and had been provided repeated opportunities of personal hearing, the Court is of the opinion that a conditional order would be passed in respect of the impugned Order-in-Original."

> "The Petitioner shall attend the hearing and a reasoned order shall be passed in accordance with law."

A Conditional Restoration

While granting relief, the Court balanced the interests of the Revenue by imposing a cost of Rs 1,00,000, payable to the Delhi High Court Bar Association. The ex-parte order has been set aside, and the petitioner has been given until December 15, 2025, to submit a response to the SCN.

Furthermore, the Court directed the authorities to restore access to the GST portal to enable the upload of the reply and directed that a fresh notice for a personal hearing be issued. By remanding the matter, the Court has ensured that the tax authority must now pass a fresh, "reasoned order" that considers the petitioner's defense, marking a victory for procedural fairness in tax litigation.