A court may grant a conditional second chance to contest an ex-parte order.

A court may grant a conditional second chance to contest an ex-parte order.

Issue

What is the legal remedy for a taxpayer against whom an ex-parte order has been passed due to their failure to respond to a show-cause notice, and who now seeks another opportunity to be heard on the merits of the case?

Facts

• The GST department issued a show-cause notice (SCN), followed by reminders and notices for a personal hearing.
• The assessee failed to file a reply to the SCN or participate in the proceedings in any way.
• As a result of this non-response, the adjudicating authority passed an ex-parte assessment order, confirming the tax demand against the assessee.
• The assessee then filed a writ petition directly in the High Court, admitting their failure to respond but requesting one final chance to substantiate their case on its merits.

Decision

The High Court, taking an equitable view, ruled in favour of the assessee but made the relief conditional.

• Following its own precedent in similar cases, the court decided to provide the assessee with one final opportunity to be heard.
• The impugned ex-parte assessment order was quashed and set aside.
• However, this relief was granted subject to the condition that the assessee first deposits 25% of the disputed tax amount.
• The matter was remanded back to the adjudicating authority with a clear direction to allow the assessee to file a reply to the original SCN within 30 days and then to pass a fresh, reasoned order on the merits of the case.

Key Takeways

1. Natural Justice is Prioritized (with Conditions): The courts place a high value on the right to be heard. They are often willing to grant a taxpayer a final chance to present their case, even if the taxpayer was initially negligent, but this is not an absolute right and can come with conditions.
2. Conditional Relief Balances Interests: The requirement of a pre-deposit (in this case, 25%) is a standard method used by the courts to balance the interests of both parties. It provides the taxpayer with a chance for a fair hearing while also safeguarding a portion of the revenue’s interest.
3. Writ Jurisdiction as an Equitable Remedy: A writ petition can be an effective last-resort remedy to seek an equitable solution when statutory timelines (like filing an appeal) may have been missed. However, the relief granted is at the court’s discretion and is not guaranteed.
4. It is a Second Chance, Not a Clean Slate: The court’s order does not delete the tax demand itself. It simply quashes the ex-parte order and gives the taxpayer a second chance to argue their case on its merits. The final outcome will depend entirely on the strength of the taxpayer’s defense in the fresh proceedings.