Facts of the Case

The petitioner, M/s Mohd Maqbool Lone, a registered GST assessee, challenged an order dated 31 December 2025 passed under Section 74 of the GST Act, whereby a demand of ₹36,00,58,562.16 towards GST, interest and penalty for the Financial Year 2018-19 was raised.

The petitioner approached the High Court under Article 226 of the Constitution of India, challenging the demand order on several grounds, primarily relating to the merits of the assessment and alleging violation of principles of natural justice, particularly non-grant of personal hearing.

Issues Involved

  1. Whether a writ petition under Article 226 is maintainable when an effective statutory appeal is available under Section 107 of the GST Act.
  2. Whether the petitioner could invoke the exception relating to violation of principles of natural justice to bypass the statutory appellate remedy.
  3. Whether denial of personal hearing constituted sufficient ground for entertaining the writ petition.

Petitioner's Arguments

  • The petitioner challenged the demand order passed under Section 74 on multiple legal and factual grounds.
  • It was argued that the adjudicating authority failed to provide the mandatory opportunity of personal hearing before passing the order.
  • The petitioner submitted that denial of personal hearing amounted to violation of principles of natural justice, thereby bringing the case within the recognized exceptions permitting exercise of writ jurisdiction despite the availability of an alternative statutory remedy.

Respondent's Arguments

  • The impugned order was appealable under Section 107 of the GST Act, providing a complete and efficacious statutory remedy.
  • The petitioner had actively participated in the adjudication proceedings by filing a detailed reply to the show cause notice.
  • There was no material to show that the petitioner had sought and was denied a personal hearing.
  • The adjudicating authority had jurisdiction to pass the order under Section 74, and therefore no exceptional circumstance existed warranting interference under Article 226.

Court Order / Findings

The High Court dismissed the writ petition and held as follows:

  • The impugned order passed under Section 74 is specifically appealable under Section 107 of the GST Act.
  • Although the High Court possesses wide powers under Article 226, it ordinarily does not entertain writ petitions where an effective statutory remedy is available.
  • The rule requiring exhaustion of statutory remedies is well settled and is subject only to recognized exceptions such as:
    • Enforcement of fundamental rights.
    • Violation of principles of natural justice.
    • Lack of jurisdiction.
    • Challenge to the constitutional validity of legislation.
  • Reliance was placed upon the Supreme Court judgments in Whirlpool Corporation vs Registrar of Trademarks (1998) 8 SCC 1 and Harbanslal Sahnia vs Indian Oil Corporation Ltd. (2003) 2 SCC 107.
  • Upon examining the record, the Court found that:
    • The petitioner had participated in the proceedings.
    • A detailed reply to the show cause notice had been submitted.
    • There was no evidence that the petitioner had requested a personal hearing which was refused.
    • The petitioner had substantially admitted the mistake leading to tax evasion in the reply submitted before the authority.
    • The adjudicating authority was fully competent to pass the order under Section 74.
  • Consequently, no violation of natural justice or any other exceptional circumstance was established to justify bypassing the statutory appellate remedy.
  • The Court relegated the petitioner to avail the remedy of appeal under Section 107 and dismissed the writ petition.

Important Clarification

This judgment reiterates the settled principle that High Courts will ordinarily refuse to entertain writ petitions challenging GST assessment or adjudication orders where an effective statutory appeal is available under Section 107 of the GST Act.

The Court further clarified that mere allegation of denial of personal hearing is insufficient. The petitioner must demonstrate actual denial of opportunity and establish that the case falls within one of the recognized exceptions to the rule of alternative remedy.

The decision reinforces that participation in adjudication proceedings and submission of detailed replies generally negate allegations of violation of natural justice unless specific prejudice is proved.

Relevant Sections Involved

  • Section 74 of the Central Goods and Services Tax Act, 2017 – Determination of tax not paid, short paid, or erroneously refunded by reason of fraud, wilful misstatement or suppression of facts.
  • Section 107 of the Central Goods and Services Tax Act, 2017 – Appeal to Appellate Authority.
  • Article 226 of the Constitution of India – Writ Jurisdiction of High Courts.

Link to Download the Order

https://mytaxexpert.co.in/uploads/1784874717_1950compressed.pdf

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