Facts of the Case

M/S. Sampath Refineries approached the Karnataka High Court challenging an ex parte assessment order dated 31.01.2025 (File No. DGSTO-2/CTO(A)-2.4/GST.(ADJ)17-18/D&R-57/2023-24) passed under Section 74(1) of the KGST Act, 2017, confirming demand along with interest under Section 50 and penalty. The petitioner's case was that the Show Cause Notice dated 14.02.2024 preceding the order was never served upon it, a fact that remained uncontroverted despite the Department's assertion of service. As the petitioner had no opportunity to respond to the allegations before the demand was confirmed, it sought quashing of the impugned order under Article 226 of the Constitution.

Issues Involved

  1. Whether the Show Cause Notice dated 14.02.2024 was validly served on the petitioner under Section 169 of the KGST Act.
  2. Whether an assessment order passed under Section 74 without proof of service of the preceding notice can be sustained.
  3. Whether the petitioner is entitled to a fresh opportunity to respond before any demand is confirmed.

Petitioner's Arguments

  • The Show Cause Notice dated 14.02.2024 was never served on the petitioner through any valid mode under Section 169 of the KGST Act.
  • In the absence of service, the petitioner had no knowledge of the proceedings and could not file a reply or avail a personal hearing.
  • The resultant ex parte order dated 31.01.2025 confirming demand, interest under Section 50, and penalty was passed in violation of natural justice and deserved to be quashed.

Respondent's Arguments

  • The Department contended that the Show Cause Notice had in fact been served on the petitioner through the common portal.
  • The assessment order was passed strictly in accordance with Section 74 of the KGST Act after following due procedure under Rule 142.
  • The petitioner ought to avail the statutory appellate remedy rather than invoke writ jurisdiction.

Court Order / Findings

  • The Court found that the Department's claim of service of the Show Cause Notice dated 14.02.2024 remained an uncontroverted assertion, with no material placed to substantiate actual service on the petitioner.
  • In the absence of proof of service of the Show Cause Notice, the consequential ex parte order confirming demand under Section 74 could not be sustained, being violative of natural justice.
  • The impugned order dated 31.01.2025 was quashed and the matter was remitted to the stage of the Show Cause Notice.
  • The petitioner was granted four weeks to file its reply, with liberty to the authority to proceed afresh in accordance with law, and a clause permitting recall of the order if the petitioner failed to cooperate.

Important Clarification

  • Service of a Show Cause Notice is a jurisdictional pre-condition for a valid assessment; an order passed without demonstrable service under Section 169 of the KGST/CGST Act cannot stand.
  • A bare assertion of service by the Department, unsupported by tracking or acknowledgment records, will not satisfy the burden of proof where the assessee specifically denies receipt.
  • Courts will ordinarily remit such matters to the notice stage rather than merely quashing the demand outright, allowing adjudication on merits after due opportunity.

Sections Involved

  • Section 74(1) of the KGST Act, 2017 — demand and recovery on grounds of fraud, wilful misstatement or suppression.
  • Section 50 of the KGST Act, 2017 — interest on delayed payment of tax.
  • Section 169 of the KGST Act, 2017 — modes of service of notices and orders.
  • Rule 142 of the KGST Rules, 2017 — issuance of summary notices/orders in FORM GST DRC series.

Decision – In Favour of

The petition was allowed and the impugned ex parte order was quashed, in favour of the petitioner/assessee, with the matter remitted for fresh adjudication after due notice.

Case Details

Karnataka High Court; WP No. 22076 of 2025; Coram: Justice M. Nagaprasanna; decided on 18.09.2025.

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