An ex-parte assessment order passed without proper service of a show cause notice is a violation of natural justice and will be set aside.
Issue
- Whether an ex-parte assessment order under Section 73 of the CGST Act is valid if the assessee was not properly served with the show cause notice, particularly when the notice was uploaded to a less conspicuous tab (“view additional notices and orders”) on the GST portal without any physical or email communication.
- What is the appropriate remedy for an assessee who has been rendered remediless because the ex-parte order was passed without their knowledge, leading to the subsequent dismissal of their appeal on the grounds of being time-barred?
Facts
The petitioner challenged an ex-parte assessment order that confirmed a demand for tax, interest, and penalty. The petitioner contended that they were never served with the reminder show cause notice that preceded the order. Consequently, they had no knowledge of the proceedings being conducted against them.
The authorities had uploaded the notice and the subsequent order to the GST portal, but placed them under the tab “view additional notices and orders” rather than the primary notice section. No physical copy was served, and no email intimation was sent to the petitioner. The petitioner only became aware of the adverse order upon discovering it on the portal’s dashboard. By the time they discovered the order and filed an appeal, the statutory time limit had lapsed, and the appeal was rejected on the ground of delay. The petitioner argued that the lack of proper service denied them the opportunity to defend their case and that the dismissal of the appeal left them without any remedy.
Decision
The High Court ruled in favour of the assessee, setting aside the ex-parte assessment order and the appellate order dismissing the appeal. The Court held that the petitioner was denied a fair opportunity to present their case due to the absence of proper service of the show cause notice.
Recognizing that the petitioner had been rendered remediless, the Court adopted a constructive approach. Instead of merely quashing the order, the Court directed that the impugned ex-parte assessment order itself should be treated as a show cause notice under Section 73 of the CGST Act. This unique direction allows the petitioner to file a reply and submit all relevant documents before the assessing officer for fresh consideration. This decision ensures that the principles of natural justice are upheld without nullifying the proceedings entirely, thereby balancing the rights of the assessee and the interests of the revenue.
Key Takeaways
- Proper Service of Notice is Mandatory: Effective communication and proper service of notices are fundamental to the principles of natural justice. Uploading a notice to an obscure or less-frequented tab on the GST portal, without any other form of intimation (like email or physical post), does not constitute valid service.
- Violation of Natural Justice: Passing an ex-parte order without ensuring the assessee has received the show cause notice is a clear violation of the principle of audi alteram partem (let the other side be heard).
- Remedy for Procedural Lapses: When an assessee is denied the statutory remedy of appeal due to a delay caused by the department’s failure to properly communicate the order, the High Court can intervene under its writ jurisdiction.
- Ex-Parte Order as a Notice: In cases of procedural failure by the tax authorities, courts can creatively fashion remedies. Treating a final order as a show cause notice is an effective way to restore the assessee’s right to be heard while allowing the department to continue the assessment proceedings from the stage of the error.