Facts of the Case

The appellant, Menacherry Lonappan Jayan, aged 52, Proprietor of M/s. MKL Agencies, Narakkal, Ernakulam, is an assessee under the GST Act on the rolls of the State Tax Officer, 2nd Circle, State GST Department, Mattancherry. He had filed returns and paid tax for the assessment year 2017-18. The 1st respondent proposed, by Ext.P1, to demand tax along with interest on an alleged non-payment of tax of Rs.77,204.88/- as per the GSTR-1 return and an alleged claim of excess input tax credit of Rs.4,23,463/-. The appellant replied to Ext.P1, and the 1st respondent thereafter issued Ext.P5 show cause notice demanding tax and interest under Section 73. The appellant uploaded Ext.P3 reply in Form GST DRC-06, with supporting attachments, through the registered GST web portal, specifically requesting an opportunity of personal hearing. The Single Judge had earlier dismissed the appellant's writ petition (WP(C) No.34729/2023), relegating him to the alternative appellate remedy; the appellant carried the matter in appeal before the Division Bench of the High Court of Kerala at Ernakulam, which decided it on 22 December 2023.

Issues Involved

  1. Whether the order (Ext.P5) finalising the GST demand under Section 73, passed without referring to the appellant's Form GST DRC-06 reply or granting the specifically requested personal hearing, violated the principles of natural justice.
  2. Whether the Single Judge was right to dismiss the writ petition on the ground of an alternative appellate remedy without addressing this alleged breach.

Petitioner's Arguments

  • The appellant had duly replied to the initial proposal in Ext.P1, and thereafter filed Ext.P3, a reply in Form GST DRC-06 with necessary attachments, through the department's own web portal.
  • The appellant specifically and expressly requested an opportunity of personal hearing while filing the Ext.P3 reply.
  • The 1st respondent's final order, Ext.P5, was passed finalising the demand without referring to the Ext.P3 reply and without granting the requested personal hearing, and the Single Judge erred in dismissing the writ petition on the ground of alternative remedy without examining this breach of natural justice.

Respondent's Arguments

  • The State's standing counsel and the learned Senior Government Pleader appeared for the respondents at the hearing of the appeal; the judgment does not record any specific justification advanced by the respondents for finalising Ext.P5 without considering the DRC-06 reply or without granting the requested personal hearing.

Court Order/Findings

  • The Division Bench found that the 1st respondent issued Ext.P5 finalising the demand without referring to the appellant's Ext.P3 reply in Form GST DRC-06 or granting the personal hearing that had been specifically requested, and that this clearly violated the principles of natural justice.
  • Holding that Ext.P5 could not be sustained and was liable to be set aside, the Court allowed the appeal, setting aside both the Single Judge's judgment and Ext.P5.
  • The 1st respondent was directed to pass a fresh order after taking into account the contentions raised in the appellant's Ext.P3 reply and after granting an opportunity of personal hearing.

Important Clarification

  • Even where an assessee has an alternative statutory appellate remedy under the GST Act, an appellate or writ court may still interfere where the original demand order under Section 73 was passed without considering a duly filed Form GST DRC-06 reply or without granting a specifically requested personal hearing.
  • Such a breach of natural justice goes to the root of the demand order and is not cured merely by relegating the assessee to the statutory appeal — the proper course is to set aside the order and direct a fresh decision after due consideration of the reply and hearing.

Sections Involved

  • Section 73 of the CGST/SGST Act, 2017 — governs determination of tax not paid, short paid, or input tax credit wrongly availed, in cases not involving fraud.
  • Form GST DRC-06 — the prescribed form for a taxpayer's reply to a show cause notice issued under Section 73/74.
  • Article 226 of the Constitution of India — the writ jurisdiction under which the original petition (later appealed) was filed.

Decision – In Favour of

The decision was in favour of the Assessee: the appeal was allowed, the demand order (Ext.P5) and the Single Judge's judgment were set aside, and the matter was remanded for a fresh order after considering the appellant's reply and granting a personal hearing.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WA No.2137 of 2023
  • CNR: Not available on record
  • Coram: Justice Dr. A.K. Jayasankaran Nambiar and Justice Dr. Kauser Edappagath
  • Decision Date: 22 December 2023
  • Disposal Nature: Writ Appeal allowed - order set aside, remanded

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