GST Order Quashed: Notices Landed in "Junk Folder," HC Remands for Fresh Hearing

GST Order Quashed: Notices Landed in “Junk Folder,” HC Remands for Fresh Hearing

Issue

Whether an ex-parte adjudication order passed under Section 73 of the CGST/KGST Act is sustainable when the assessee failed to file a reply or participate in the proceedings because the statutory notices (ASMT-10, DRC-01A, SCN) were delivered to the “junk/spam folder” of their email, thereby going unnoticed.

Facts

The Discrepancy: The Department noticed a discrepancy where the total output tax liability declared in GSTR-3B was less than that declared in GSTR-1.
The Procedure:
1. Notice in Form GST ASMT-10 was issued.
2. Intimation in Form GST DRC-01A was issued.
3. Finally, a Show Cause Notice (SCN) was issued.
Non-Compliance: The assessee did not file any response to any of these communications.
The Order: Consequently, the Adjudicating Authority passed an ex-parte order under Section 73 confirming the tax demand.
Assessee’s Defense: The assessee challenged the order in the High Court, submitting that they were completely unaware of the notices/orders because the emails sent by the Department had landed in the “junk folder” of their registered email account. They claimed the omission was due to bona fide reasons and unavoidable circumstances.

Decision

The Karnataka High Court ruled in favour of the assessee.
Justice-Oriented Approach: The Court accepted the assessee’s specific assertion regarding the email issue. It held that the inability to reply was due to “sufficient cause” (the technical issue of emails going to spam).
Natural Justice: To prevent a miscarriage of justice where a demand is confirmed without a hearing due to communication gaps, the Court decided to adopt a liberal approach.
Remand: The impugned order was set aside. The matter was remitted back to the Respondent Authority for fresh consideration.
Outcome: The assessee was granted one more opportunity to submit a reply and contest the proceedings on merits.

Key Takeaways

“Junk Folder” Defense Accepted: Courts are increasingly recognizing the practical realities of digital communication. If an assessee can plausibly argue that they missed a notice because of email filters (spam/junk), High Courts may grant relief to ensure a fair hearing.
Opportunity Over Technicality: Even in cases of total non-compliance (ignoring multiple notices), if the reason is bona fide and not willful evasion, the judiciary prefers adjudication on merits over ex-parte confirmations.
Duty to Monitor: While relief was granted here, taxpayers should regularly check all email folders and the GST portal dashboard to avoid such litigation.
GSTR-1 vs 3B Mismatch: The substantive issue remains the liability difference. The assessee must now explain why GSTR-3B liability was lower than GSTR-1 in the fresh proceedings.

HIGH COURT OF KARNATAKA

Business Aircraft Management Services (P.) Ltd.

State of Karnataka^*

S.R.Krishna Kumar, J.

WRIT PETITION No. 24010 OF 2025 (T-RES)

OCTOBER 24, 2025

Senthil Kumar D.U., Adv. for the Petitioner. Smt. Jyoti M. Maradi, HCGP for the Respondent.

ORDER

1. In this petition, petitioner seeks for the following reliefs:

“(a) Issue a writ Certiorari or any other appropriate writ Quashing the impugned order dated 13.03.2024 vide Annexure-A, passed by Respondent No.3, The Assistant Commissioner of Commercial taxes, LGSTO -17, DGSTO-04 in determining and directing the Petitioner to pay tax, interest and penalty for a sum of Rs.16,15,303/- and consequently, direct the release of Rs.11,70,369/- which stands frozen pursuant to Notice in Form GST DRC-13 from the Petitioner’s bank account bearing No.50200017152350 held with HDFC Bank, HSR Layout Branch, Bangalore and to;

(b) Pass any other order or direction as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case, in the interest of justice and equity.”

2. Heard learned counsel for the petitioner and learned HCGP for the respondents and perused the material on record.

3. A perusal of material on record will indicate that pursuant to notice in Form GST ASMT-10 dated 16.10.2023, the respondent No.3 issued an intimation notice under Form GST DRC – 01A dated 17.11.2023 to the petitioner, who did not issue any reply/response to the same. Subsequently, the respondent No.3 issued a show-cause notice dated 26.12.2023 alleging that total output GST declared in R3B is less than R1. Since the petitioner did not submit his reply to the said show-cause notice also, the respondent No.3 proceeded to pass the impugned order dated 13.03.2024 under Section 73(9) read with Section 73(10), 50, 122(2)(a) of the KGST Act, 2017 confirming the total demand of Rs.16,15,303/- including the tax, interest and penalty.

4. Learned counsel for the petitioner submits that the petitioner was not aware of any of the notices/intimations/orders being issued since they were being sent to email account of the petitioner which was under the Junk folder and not appearing in the inbox and hence couldn’t submit replies/ documents to neither the pre-intimation notice nor the show-cause notice and resultantly couldn’t contest the proceedings. Aggrieved by the said order the petitioner having no option has approached this Court by way of the present petition interalia contending that the inability and omission on the part of the petitioner to submit a reply to the preintimation notice and show-cause notice and contest the proceedings was due to bonafide reasons, unavoidable circumstances and sufficient cause and submits that if one more opportunity is provided, by setting aside the impugned order, the petitioner would submit a reply to the show-cause notice and contest the proceedings.

5. Per contra, learned HCGP for the respondents submits that there is no merit in the petition and the same is liable to be dismissed.

6. Though several contentions have been urged by both sides, the learned counsel for the petitioner submits that the petitioner was not aware of any of the notices/intimations/orders being issued since they were being sent to email account of the petitioner which was under the Junk folder and not appearing in the inbox and the fact that the petitioner did not file its reply/ documents culminated in the impugned ex-parte order.

7. Under these circumstances, having regard to the specific assertion on the part of the petitioner that his inability and omission to submit replies and contest the proceedings was due to bonafide reasons, unavoidable circumstances and sufficient cause, I deem it just and appropriate to adopt a justice oriented approach and provide one more opportunity to the petitioner by setting aside the impugned order dated 13.03.2024 remitting the matter back to the respondent No.3 for reconsideration of the matter afresh in accordance with law from the stage of petitioner submitting reply to the impugned show-cause notice dated 26.12.2023.

8. In the result, I pass the following:

ORDER

(i) The petition is hereby allowed.

(ii) The impugned order dated 13.03.2024 passed by the respondent No.3 under Section 73(9) read with Section 73(10), 50, 122(2)(a) of the KGST Act and concurrent provisions under Sections 6 and 73 of the CGST Act 2017 and Section 20 of the IGST Act, 2017 at Annexure – A is hereby set aside.

(iii) The matter is remitted back to the respondent No.3 for reconsideration afresh in accordance with law within a period of three months from the stage of petitioner submitting its reply to the Show-cause Notice dated 26.12.2023 at Annexure – E.

(iv) The petitioner is directed to appear before the respondent No.3 on 10.11.2025 without awaiting further notice from the respondent No.3.

(v) The liberty is reserved in favour of the petitioner to submit replies, documents etc., which shall be considered by the first respondent who shall provide sufficient and reasonable opportunity to the petitioner and hear them and proceed further in accordance with law.

(vi) In the event, the Petitioner does not appear before the respondent No.3 on 10.11.2025 as stated supra, present order shall stand automatically recalled without further orders.

(vii) Remand amount recovered by the respondent shall be subject to the final outcome of the proceedings.