Demand Order Quashed as Hearing Not Granted After Registration Cancellation.

Issue

Is a demand order passed ex parte under Section 73 legally valid if the show-cause notice was uploaded to the GST portal after the taxpayer’s registration had already been cancelled, and no opportunity for a personal hearing was provided as mandated by Section 75(4)?

Facts

The petitioner’s GST registration was cancelled on February 4, 2023, due to non-commencement of business.
Subsequently, on December 28, 2023, the tax department uploaded a show-cause notice (Form DRC-01) to the portal. This notice proposed to disallow Input Tax Credit (ITC) for FY 2018-2019 due to a mismatch between GSTR-3B and GSTR-2A/2B.
Since their registration was cancelled, the petitioner did not access the portal and was unaware of the notice.
On March 11, 2024, the department passed an ex parte order-in-original, confirming the demand without issuing any notice for a personal hearing.

Decision

The High Court quashed and set aside the impugned order-in-original.
It reasoned that a taxpayer whose registration has been cancelled cannot be expected to check the GST portal for subsequent notices. Therefore, the service of the notice was not effective.
More importantly, the court found a clear breach of Section 75(4) of the CGST Act, which makes a personal hearing mandatory before passing an adverse order.
The matter was remanded back to the adjudicating authority for a fresh (de novo) decision after providing the petitioner with a proper opportunity to file a reply and be heard.

Key Takeaways

Natural Justice is Supreme: Passing an adverse order without a fair opportunity of hearing is a fundamental violation of natural justice and is sufficient ground for the order to be quashed.
Mandatory Personal Hearing: Section 75(4) is not a mere formality. If an adverse decision is contemplated, the tax authority must grant a personal hearing. Failure to do so renders the order legally unsustainable.
Post-Cancellation Notices: Authorities must use alternative means to serve notices on taxpayers whose registrations have been cancelled, as they cannot be presumed to have access to or be monitoring the GST portal.

HIGH COURT OF GUJARAT

Apollo Engineers

State of Gujarat

BHARGAV D. KARIA and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPL. NO. 11362 of 2025

SEPTEMBER 11, 2025

Uchit N Sheth, Adv. for the Petitioner. Ms Shrunjal Shah, AGP for the Respondent.

ORDER

Bhargav D. Karia, J. Heard learned advocate Mr.Uchit N.Sheth for the petitioner and learned Assistant Government Pleader Ms. Shrunjal T. Shah for the respondent.

2. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for quashing and setting aside the order dated 09.06.2025 passed by respondent no.2 rejecting the appeal of the petitioner on the ground of limitation as well as order-in-original dated 11.03.2024 for the Financial Year 20182019 passed under section 73 of the Central/Gujarat Goods and Services Tax Act, 2017 (For short “the GST Act”).

3. Brief facts of the case are that the petitioner who is engaged in the business of manufacturing and trading of industrial valves, discontinued its business and operations from the year 2021. The petitioner however filed the returns for the period from April, 2020 to December, 2022.

4. A show cause notice dated 07.11.2022 was issued by the Jurisdictional Assessing Officer proposing to cancel the registration on the ground of non commencement of business and accordingly, the registration of the petitioner was cancelled with effect from 01.01.2023 by order dated 04.02.2023.

5. Respondent No.3 State Tax Officer, Ghatak-19 Division-2, Ahmedabad issued a show cause notice dated 28.12.2023 in Form GST DRC-01 by uploading the same on GSTN Portal proposing disallowance of input tax credit for the year 2018-2019 on the basis of difference between Form GSTR-3B and Form GSTR-2A and Form GSTR-2B.

6. It is the case of the petitioner that as registration of the petitioner was cancelled by order dated 04.02.2023, the petitioner did not verify the portal and therefore, was not aware about the issuance of notice by respondent no.3.

7. Respondent no.3 thereafter passed the impugned order dated 11.03.2024 under section 73 raising demand on account of the difference between Form GSTR-3B and Form GSTR-2A.

8. Learned advocate Mr. Uchit Sheth for the petitioner submitted that the impugned order is passed ex-parte without providing any opportunity of personal hearing to the petitioner as contemplated under section 75(4) of the GST Act in addition to the fact that the petitioner never received the show cause notice issued in Form GST DRC-01 as same was uploaded on portal after cancellation of registration of the petitioner in the month of February, 2023.

9. It was submitted by learned advocate Mr. Sheth that the petitioner came to know about the passing of the impugned orderin-original by respondent no.3 when the petitioner received phone call from the office of respondent no.3 proposing recovery pursuant to the impugned orderin-original and inquiring whether the petitioner had filed any appeal against such order or not. It was pointed out that thereafter the petitioner has preferred an appeal under section 107 of the GST Act, however the said appeal was time barred as the appeal was filed with delay of 49 days.

10. It was therefore, submitted that the matter may be remanded back to respondent no.3 to pass fresh de novo order in accordance with law after giving an opportunity of hearing to the petitioner.

11. Learned advocate Mr. Sheth also pointed out that in the appeal memo, the petitioner has explained the difference in Form GSTR-3B and Form GSTR-2A by submitting letter dated 26.07.2019 from M/s. Jasmin Engineers addressed to the petitioner that during filing Form GSTR-1 in GST Portal, wrong GSTN number was mentioned resulting into difference between Form GSTR-3B and Form GSTR-2A filed by the petitioner.

12. On the other hand, learned Assistant Government Pleader Ms. Shrunjal Shah for the respondent under instructions submitted that no opportunity was given to the petitioner by respondent no.3 while complying with the provision of section 75(4) of the GST Act. It was also submitted by learned AGP Ms. Shah that respondent no.3 after issuance of notice by this Court has verified and provided the instruction that the difference between Form GSTR-3B and Form GSTR-2A was only due to wrong mentioning of GST number by suppliers of the goods to the petitioner which was corrected in the subsequent returns filed by the said supplier.

13. In view of above submissions made by learned advocates for the respective parties, it is not in dispute that the registration number of the petitioner was cancelled in the month of February 2023 and thereafter, the impugned notice was issued on 28.12.2023 by uploading the same on portal and therefore, the same could not have been verified by the petitioner as the portal was not accessed after cancellation of the registration by the petitioner. Moreover, there is clear breach of provisions of section 75(4) of the GST Act as no notice for personal hearing has been issued by respondent no.3 before passing the impugned order-in-original under section 73 of the GST Act.

14. It also appears that the petitioner had tried to explain the difference between Form GSTR-3B and Form GSTR-2A while filing appeal before the appellate authority which was rejected on the ground of limitation.

15. In view of the above facts emerging from the record, the impugned order is quashed and set aside only on the ground of breach of principles of natural justice and the matter is remanded to respondent no.3 to pass fresh de novo order after providing opportunity of hearing to the petitioner as well as opportunity to file reply to the show cause notice by the petitioner, as contemplated under section 75(4) of the GST Act.

16. It is clarified that we have not gone into the merits of the matter and the impugned order is quashed and set aside only on the ground of breach of principles of natural justice.

17. Petition is accordingly disposed of. Notice is discharged. No order as to costs