Facts of the Case

M/s Paxal Fuel Corporation, a partnership firm registered under the GST Act, 2017, challenged an Order of Adjudication dated 23.12.2025 passed under Section 73(9) of the Central Goods and Services Tax Act, 2017.

The petitioner approached the Karnataka High Court seeking quashing of the ex parte adjudication order and restoration of the matter to the Show Cause Notice stage so that it could obtain an opportunity to produce its books of accounts and respond to the proceedings.

The impugned adjudication order referred to a Show Cause Notice having been sent to the petitioner’s registered e-mail ID. However, the petitioner specifically disputed service of the Show Cause Notice and asserted that the notice had not been addressed to its registered e-mail ID before the adjudication order was passed.

The petitioner further asserted that the Show Cause Notice was uploaded on the GST portal only after the adjudication order. The proceedings involved a substantial demand comprising tax, interest and penalty exceeding ₹1,13,40,548. These facts and reliefs are recorded in the judgment.

Issues Involved

The principal issues arising before the Karnataka High Court were:

  1. Whether an adjudication order under Section 73(9) of the CGST Act, 2017 could be sustained when the petitioner categorically disputed service of the Show Cause Notice at its registered e-mail ID.
  2. Whether adjudication substantially founded on the petitioner’s failure to respond to the Show Cause Notice was valid when the petitioner alleged that no effective opportunity to respond had been provided.
  3. Whether the alleged uploading of the Show Cause Notice on the GST portal only after passing of the adjudication order undermined the fairness of the adjudication proceedings.
  4. Whether the petitioner was entitled to a real opportunity to answer a substantial demand involving tax, interest and penalty exceeding ₹1.13 crore.
  5. Whether the appropriate relief was to quash the adjudication order and restore the proceedings for fresh consideration while preserving all questions for determination by the competent authority.

Petitioner’s Arguments

The petitioner, through learned counsel, argued that although the impugned adjudication order referred to the Show Cause Notice as having been sent to the registered e-mail ID, the petitioner categorically maintained that the notice had not been addressed to its e-mail ID before the date of adjudication.

The petitioner further contended that the Show Cause Notice was uploaded on the portal only after the adjudication order had already been passed.

Accordingly, the petitioner’s case was that it had no effective or real opportunity to respond to the Show Cause Notice before the substantial demand was adjudicated.

The petitioner therefore sought quashing of the ex parte adjudication order and restoration of the matter to the Show Cause Notice stage, enabling it to submit a detailed response and place relevant books of accounts and materials before the authority.

Respondent’s Arguments

The learned Additional Government Advocate appeared for the respondent and accepted notice.

The respondent’s side pointed out that the Assessing Officer had recorded that attempts to communicate with the petitioner through the known telephone numbers had proved futile.

Thus, the departmental record reflected unsuccessful efforts at communication through available telephone contact details.

However, the Court considered this circumstance alongside the petitioner’s categorical assertion that the Show Cause Notice had not been sent to its registered e-mail ID before the adjudication order.

Court Order / Findings

The Karnataka High Court found it appropriate to interfere with the adjudication order.

The Court observed that the adjudication was essentially based on the petitioner’s failure to respond to the Show Cause Notice, without otherwise providing reasoning, while the petitioner specifically asserted that the Show Cause Notice had not been sent to its registered e-mail ID.

The High Court emphasized that the petitioner “must have a real opportunity” before being required to answer a demand comprising tax, interest and penalty exceeding ₹1,13,40,548.

Accordingly, the Court passed the following directions:

  • The writ petition was allowed in part.
  • The Order of Adjudication dated 23.12.2025 was quashed.
  • The proceedings were restored to the respondent for due consideration.
  • Liberty was reserved to the petitioner to file a detailed response to the Show Cause Notice dated 29.09.2025 by 06.07.2026.
  • All questions were expressly left open for due consideration by the competent authority.

The operative directions are specifically recorded on pages 4 and 5 of the judgment.

Important Clarification

This judgment does not hold that the tax demand against the petitioner was substantively incorrect.

The High Court did not adjudicate the merits of the proposed tax, interest or penalty liability. It also did not finally determine the underlying factual or legal questions forming the basis of the Section 73 proceedings.

The Court’s interference was based on the need to provide the petitioner a real and effective opportunity to respond before being called upon to answer a demand exceeding ₹1.13 crore.

Therefore, the legal effect of the judgment is:

  • the adjudication order dated 23.12.2025 stands quashed;
  • the adjudication proceedings stand restored;
  • the petitioner may submit a detailed response to the Show Cause Notice dated 29.09.2025 by 06.07.2026; and
  • all substantive questions remain open for fresh consideration.

This distinction is important because the ruling is a procedural remand for due consideration, not a final decision extinguishing the underlying GST demand.

Sections / Legal Provisions Involved

Section 73(9) of the CGST Act, 2017 – The principal statutory provision expressly referred to in the judgment. It concerns determination of tax, interest and penalty pursuant to proceedings under Section 73.

Section 73 of the CGST Act, 2017 – Governs determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised for reasons other than fraud, wilful misstatement or suppression of facts.

Articles 226 and 227 of the Constitution of India – Invoked by the petitioner to challenge the adjudication order before the Karnataka High Court.

Principles of Natural Justice – Particularly the requirement of a real and effective opportunity to respond before an adverse adjudication involving substantial civil and fiscal consequences.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783065306_371compressed.pdf 

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