Serving a notice on the GST portal after the taxpayer’s registration has been cancelled is not sufficient service if no response is received.

Serving a notice on the GST portal after the taxpayer’s registration has been cancelled is not sufficient service if no response is received.

Issue

Is the service of a show-cause notice (SCN) by simply uploading it to the GST portal considered valid and sufficient if the taxpayer’s registration has already been cancelled, making it unlikely for them to be actively monitoring the portal?

Facts

• The assessee had voluntarily applied for and was granted the cancellation of their GST registration.
• Sometime after the registration was cancelled, the tax department issued a show-cause notice (SCN) to the assessee, presumably for a period prior to the cancellation.
• This SCN was served only by uploading it to the GST portal. No attempt was made to serve it via email, post, or any other method.
• Since their registration was no longer active, the assessee was not monitoring the portal. As a result, they remained completely unaware of the notice and, therefore, failed to file a reply in time.
• Based on this non-response, the department passed an adverse ex-parte order against the assessee.

Decision

The High Court ruled in favour of the assessee and remanded the matter for a fresh hearing.

• The court acknowledged that while uploading a notice to the portal is generally a valid mode of service for active taxpayers, this situation was different.
• It reasoned that when a taxpayer’s registration is cancelled, it is unreasonable to assume they will continue to check the portal regularly.
• The court held that when no response was received to the notice that was uploaded to the portal, the officer should have applied their mind to the situation and explored the possibility of serving the notice through other available modes (like email or post) to ensure it was actually communicated.
• The impugned ex-parte order was set aside. However, the court made this relief conditional upon the assessee paying 10% of the disputed tax amount as a pre-deposit, to balance the interests of both parties.

Key Takeways

• The Context of Service Matters: The validity of a particular mode of serving a notice depends on the circumstances. What is considered a valid service for an active taxpayer (portal upload) may not be sufficient for a taxpayer whose registration has been cancelled and who has no reason to be checking the portal.
• The Officer’s Duty to Apply Mind: Tax officers are expected to act reasonably. If a notice served through a single mode elicits no response, especially in unusual circumstances (like a cancelled registration), the officer should consider using alternative methods to ensure that the principles of natural justice are met and the taxpayer is actually informed.
• Balancing the Interests of Both Parties: The court’s decision to impose a condition of a 10% pre-deposit is a common practice in writ petitions against tax demands. It balances the taxpayer’s right to a fair hearing with the revenue’s interest in securing the potential tax dues.
• A Practical and Realistic Approach: This ruling reflects a practical understanding of a taxpayer’s behavior. Once a business is closed and its registration is cancelled, the proprietor is highly unlikely to be logging into the GST portal. The court’s decision acknowledges this reality.