Adjudication orders and demand notices must be set aside

Adjudication orders and demand notices must be set aside if the initial show cause notice denies a personal hearing.

Issue

Whether an adjudication order and subsequent demand notice issued under Section 73 are legally sustainable when the originating show cause notice in Form GST DRC-01 explicitly marks the date, time, and venue of a personal hearing as “not applicable,” thereby denying the statutory opportunity of being heard.

Facts

Proceedings were initiated against the petitioner under the West Bengal GST Act by issuing a show cause notice in Form GST DRC-01.
The notice required the petitioner to submit a reply within fourteen days.
However, the Proper Officer omitted the date, time, and venue for a personal hearing in the notice, explicitly marking those specific fields as “not applicable.”
The petitioner did not file a response to this notice.
The Proper Officer proceeded to pass an adverse adjudication order and issued a corresponding Demand Notice in Form GST DRC-07.
The petitioner challenged the entire proceeding through a writ petition, citing a total denial of natural justice and a violation of the statutory mandate to provide an opportunity for a hearing.
The State defended the action by claiming that the petitioner had actively appeared and participated in the process.

Decision

The court held that once a show cause notice in Form GST DRC-01 is issued, the petitioner is statutorily entitled to a reasonable opportunity of a personal hearing.
Marking the personal hearing fields as “not applicable” in the DRC-01 clearly demonstrated the Revenue’s disinclination to grant a hearing, which directly breached the statutory mandate.
The court ruled that because the initial action was deeply vitiated by this procedural denial, the subsequent proceedings based on it could not be legally sustained.
Since the assessment was founded on a fundamentally defective show cause notice, the court annulled the entire block of proceedings.
The court set aside the show cause notice (Form GST DRC-01), the final adjudication order, and the Demand Notice (Form GST DRC-07).
The court granted the Revenue the liberty to initiate fresh proceedings, provided they afford the petitioner a proper personal hearing, with the statutory limitation period commencing from the date of the new notice.

Key Takeaways

Mandatory Natural Justice: Under Section 75 of the GST Act, providing an opportunity for a personal hearing is not discretionary. It is a mandatory statutory requirement that must be offered before any adverse order is passed.
Pre-marked Disabling is Fatal: Actively writing “not applicable” or omitting scheduling details in the foundational show cause notice (DRC-01) invalidates the notice itself, rendering any subsequent demand order legally void.
Fresh Proceedings with Reset Timelines: When an assessment is quashed due to procedural defects, the Revenue is generally permitted to start afresh. However, they must issue a clean notice and the statutory limitation clock will reset to start from the date of that new notice.

HIGH COURT OF CALCUTTA

Rajat Dalmia

Assistant Commissioner of Revenue

Kausik Chanda, J.

W.P.A. No. 1031 of 2026

JULY 9, 2026

Boudhayan Bhattacharyya, Ms. Stuti Bansal, Ms. Keya Kundu and Ms. Chayna Kumary for the Petitioner. Jagriti Mishra, Ms. Mrinmayee Das, Dilip Kumar Agarwal and Bishwa Raj Agarwal for the Respondent.

ORDER

1. Mr. Dilip Kumar Agarwal and Mr. Bishwa Raj Agarwal, learned advocates appear for Central Goods and Service Tax Authorities. Let their appointment be regularised.

2. A show cause notice in Form GST DRC-01 dated December 27, 2023, under Section 73 of the West Bengal Goods and Services Tax Act, 2017, was issued to the petitioner, seeking a response within fourteen days from the date of the notice without specifying time, date and venue. The petitioner failed to respond.

3. Challenging these proceedings, the petitioner has filed this writ petition before this Court. The petitioner contends that he was not afforded a proper opportunity for a hearing by the authority and relies on the judgment reported at Goutam Bhowmik v. State of West Bengal 83 GSTL 155 (Calcutta)/(2024) SCC OnLine Cal 372.

4. Mr. Jagriti Mishra, learned advocate appearing for the State, on the other hand, contends that a perusal of the order dated April 25, 2024 makes it clear that the petitioner was given an opportunity of hearing, he appeared before the authority and participated in the proceedings.

5. This Court is of the view that when a proceeding has been initiated by issuance of Form GST DRC-01, the petitioner was entitled to a further opportunity of hearing.

6. A perusal of the notice dated December 27, 2023, clearly indicates that the authority marked ‘not applicable’ in the columns for the date, time, and venue of the personal hearing. This suggests that the authority was not inclined to provide a personal hearing to the petitioner, leading to the assessment order dated April 25, 2024. The learned advocate for the petitioner has appropriately relied on the judgment in Goutam Bhowmik’s case (supra). The relevant part of the judgment is quoted below:

“11. Considering the facts and circumstances of the present case, the provisions of Section 73 read with Section 75(4) of the WBGST/CGST Act, 2017, we are of the view that proper officer is bound to afford an opportunity of hearing where either a request in writing is received by him from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. To afford opportunity of hearing is a statutory mandate which cannot be violated by proper officer and in the event of violation the order passed by the proper officer cannot be sustained. Under the circumstances, the impugned order dated 25.03.2021 passed by the proper officer for the period April 2018 to March 2019 cannot be sustained and deserves to be quashed and the matter deserves to be remanded to the concerned Authority to pass an order afresh in accordance with law after affording reasonable opportunity of hearing to the petitioner/appellant.”

7. In my view, the petitioner’s case is covered by this decision.

8. If the initial action is bad, subsequent proceedings based on such action cannot be sustained. [See: Chairman-Cum-M.D., Coal India Ltd. v. Ananta Saha (SC)/(2011) 5 SCC 142].

9. The assessment was based on a show cause notice denying the petitioner the right to a personal hearing. Consequently, the proceedings based on the defective show cause notice must go.

10. Therefore, the show cause notice in Form GST DRC-01 dated December 27, 2023, the order of adjudication along with a Demand Notice in Form GST DRC-07 dated April 25, 2024, are set aside. The authority is permitted to initiate a fresh proceeding under Section 73 of the Act of 2017, giving an opportunity of hearing to the petitioner. Should a new proceeding be initiated, the limitation under Section 73(10) of the Act should commence from the date of the new notice.

11. Accordingly, WPA 1031 of 2026 is disposed of.

12. Urgent photostat certified copy of this order, if applied for, be supplied to the learned advocates for the parties on usual undertakings.