HC Flags Systemic Portal Lapses: Mere Upload Without Alerts is Not Valid Service; Order Quashed

HC Flags Systemic Portal Lapses: Mere Upload Without Alerts is Not Valid Service; Order Quashed

Issue

Whether the mere uploading of a Show Cause Notice (SCN) or order on the GST portal constitutes valid service under Section 169 of the CGST Act, particularly when no alerts are generated, key dates are missing, and the “systemic lapses” result in taxpayers losing their statutory right to appeal due to strict limitation periods.

Facts

• The Demand: The petitioner, Riya Construction, faced a GST adjudication order creating a demand of approximately ₹1.61 lakh.

• Procedural Failure:

  • No valid Show Cause Notice (SCN) was physically served.

  • The notices were merely uploaded to the GST portal without proper alerts to the taxpayer.

  • The order did not reflect key dates regarding the reply deadline or the personal hearing schedule.

• Consequence: Due to the lack of effective communication, the petitioner could not file a reply or attend the hearing. The order was passed ex-parte.

• Systemic Issue: The High Court noted that hundreds of similar writ petitions are being filed, highlighting a widespread “systemic challenge” where taxpayers remain unaware of proceedings initiated on the portal until recovery starts.

• Loss of Remedy: The Court observed that because the Appellate Authority lacks the power to remand cases (under Section 107(11) of the CGST Act), taxpayers who miss the initial notice often lose their right to a fair trial on facts, as the appellate stage becomes time-barred or limited in scope.

Decision

• The Allahabad High Court ruled in favour of the assessee and quashed the adjudication order.

• Service Definition: The Court held that mere uploading of notices on the portal does not constitute valid service if it is not accompanied by proper alerts or if the taxpayer is not made aware of the proceedings.

• Violation of Natural Justice: The absence of an opportunity to reply or appear for a personal hearing rendered the order legally unsustainable.

• Remand Conditions:

  • The order was set aside subject to the petitioner depositing ₹16,000 (approx. 10% of the demand) with the department.

  • The Authority was directed to serve a fresh SCN along with all relied-upon documents.

  • The Authority must grant at least two weeks’ notice for a personal hearing.

  • The fresh proceedings must be concluded within six months.

Key Takeaways

• Portal Upload $\neq$ Valid Service: This judgment reinforces the view that the department cannot rely solely on the portal’s “Additional Notices” tab. There must be a proactive alert (email/SMS) to ensure the taxpayer is informed.

• Systemic Glitches Recognized: The judiciary is taking cognizance of the “digital divide” or system failures within the GSTN that prevent effective communication, refusing to penalize taxpayers for portal deficiencies.

• The Remand Gap: The judgment highlights a critical flaw in GST litigation: since the First Appellate Authority cannot remand cases, High Courts are forced to intervene in writ jurisdiction to “reset” proceedings where natural justice was denied at the adjudication stage.

• Cost of Restoration: Even when the court finds the department at fault, relief often comes with a financial condition (deposit) to ensure the taxpayer’s bona fides.