HC Quashes Ex Parte GST Order; Remands Subject to 25% Deposit or ECL Recovery Verification.

Issue

Whether an ex parte assessment order (DRC-07), passed after a Show Cause Notice (DRC-01) was allegedly not noticed by the taxpayer on the GST portal, should be quashed, and what conditions apply for a fresh hearing, especially when the tax has allegedly already been recovered.

Facts

An assessment order (DRC-07) was passed against the petitioner for the period 2020-21.
This order was preceded by a Show Cause Notice (DRC-01), which the petitioner claimed was only posted on the portal and went unnoticed.
The petitioner produced an extract of their Electronic Credit Ledger (ECL) for May 2025, asserting that the department had already recovered the disputed tax amount by debiting the ledger.
The petitioner filed a writ petition challenging the ex parte order.

Decision

The High Court, following its “consistent view” in similar cases, quashed the impugned assessment order.
The matter was remanded back to the adjudicating authority for a fresh decision, but this relief was made conditional.
The authority was directed to first verify whether the debit entries in the petitioner’s ECL (from May 2025) actually corresponded to the tax confirmed in the impugned order.
If the tax was already recovered: The authority shall proceed to pass a fresh order on the merits (after receiving the petitioner’s reply) within three months.
If the tax was NOT recovered: The petitioner, as a condition for the remand, must deposit 25% of the disputed tax amount in cash within 30 days.
Upon compliance, the petitioner is permitted to file a detailed reply to the original SCN.

Key Takeaways

Writ Jurisdiction for Natural Justice: High Courts will often exercise their writ jurisdiction to set aside ex parte orders passed due to “portal non-service” to grant a final opportunity for natural justice, even if the appeal time has lapsed.
Conditional Relief: This relief is not automatic. The court, balancing the taxpayer’s default with the principles of justice, imposed a 25% cash deposit condition, which is significantly higher than the standard 10% pre-deposit for an appeal, as a prerequisite for the fresh hearing.
Verification of Prior Recovery: The court adopted a pragmatic approach by linking the 25% deposit to the alleged recovery. If the department has already recovered the tax (illegally or otherwise), the petitioner is not required to deposit the 25% to secure a new hearing.

HIGH COURT OF MADRAS

VST and Sons

Assistant Commissioner, Chennai^*

C. Saravanan, J.

W.P. No. 34744 of 2025
W.M.P. Nos. 38919 & 38920 of 2025

SEPTEMBER 17, 2025

Ms. M. Sangeetha for the Petitioner. Ms. Amirtha Poonkodi Dinakaran, Govt. Adv. for the Respondent.

ORDER

1. This Writ Petition is disposed of at the time of admission with the consent of the learned counsel for the Petitioner and the learned Government Advocate who takes notice on behalf of the Respondent.

2. The Petitioner is before this Court against the impugned order dated 12.02.2025 passed in Form GST DRC-07 for the tax period between April 2020 to March-2021 under Section 73 of the respective GST Enactments. The impugned order was preceded by a notice in DRC-01 dated 26.11.2024.

3. Learned counsel for the Petitioner would submit that all though the aforesaid notice dated 26.11.2024 in DRC-01 was issued to the Petitioner, the Petitioner failed to note the same as it was posted in the website and thus, the Petitioner has suffered an adverse impugned order dated 12.02.2025.

3.1. Learned counsel for the petitioner further submits that the entire disputed amount has been recovered. To substantiate the same, the learned counsel for the Petitioner has drawn the attention of this Court to Page No.58 of the Typed Set which is an extract of Electronic Credit Ledger of the Petitioner for the period between 21.05.2025 to 31.05.2025, after the impugned order was passed on 12.02.2025.

4. The consistent view of this Court under similar circumstances has been to quash the Assessment Order and remit the case back on terms subject to the assessee depositing 25% of the disputed tax in cash. Whether the amount mentioned in the extract of the Electronic Credit Ledger for the period between 21.05.2025 to 31.05.2025 corresponds to tax that has been confirmed by vide impugned order dated 12.02.2025 or not shall be verified by the Respondent.

5. In case, the aforesaid amount is not towards the tax that has been confirmed vide impugned order, the Petitioner may be directed to deposit 25% of the disputed tax in cash. In case, the amount corresponds to the amount confirmed vide impugned order dated 12.02.2025, the Respondent shall proceed to pass a fresh order on merits within a period of three months from the date of receipt of copy of this order. The Petitioner shall therefore file a detailed reply to the notice in DRC-01 dated 26.11.2024 by treating the impugned order dated 12.02.2025 as an addendum to the show cause notice dated 26.11.2024.

6. This Writ Petition is disposed of with the above observation. Consequently, connected miscellaneous petitions are closed. There shall be no order as to costs.