Facts of the Case

Sagar Manjunatha Subramanya was issued a Show Cause Notice dated 24.05.2024 under Section 74(1) of the CGST/KGST Act, 2017, alleging tax liability along with interest and penalty under Section 122(2)(a). The petitioner filed a written reply to the notice but did not appear for the personal hearing granted under Section 75(4) of the CGST Act. Consequently, an order dated 19.08.2025 was passed confirming the demand, accompanied by a summary in Form GST DRC-07, based on the earlier Form GST DRC-01 summary of the Show Cause Notice. The petitioner approached the Karnataka High Court contending that the non-appearance was on account of bonafide reasons and unavoidable circumstances, and sought an opportunity to be heard afresh.

Issues Involved

  1. Whether an adjudication order under Section 74(9) of the CGST Act can be sustained where the assessee filed a written reply but did not avail the personal hearing due to bonafide reasons.
  2. Whether denial of a fresh opportunity of hearing amounts to violation of the mandatory requirement under Section 75(4).
  3. Whether the impugned order, DRC-07 summary, Show Cause Notice and DRC-01 summary deserve to be set aside and the matter remitted.

Petitioner's Arguments

  • The petitioner had filed a written reply to the Show Cause Notice within time, demonstrating genuine intent to contest the proceedings on merits.
  • Non-appearance at the personal hearing was on account of bonafide reasons and circumstances beyond the petitioner's control, not a deliberate attempt to delay proceedings.
  • Section 75(4) of the CGST Act mandates a personal hearing before an adverse order is passed, and denial of a further opportunity after a bonafide lapse violates natural justice.
  • The matter deserved to be remitted for fresh consideration with a further opportunity of hearing.

Respondent's Arguments

  • The petitioner was granted a personal hearing but failed to appear despite adequate opportunity, and the order was passed strictly following the procedure under Section 74 and Rule 142 of the CGST/KGST Rules.
  • The order was well-reasoned and based on the material already available, including the petitioner's own reply.

Court Order / Findings

  • The Court, applying its consistent approach in similar matters, held that where an assessee shows bonafide reasons and sufficient cause for non-appearance at a personal hearing, an opportunity for a fresh hearing ought ordinarily to be granted before finally confirming a Section 74 demand.
  • The impugned Order-in-Original dated 19.08.2025, the summary in Form GST DRC-07, the Show Cause Notice, and the summary in Form GST DRC-01 were all set aside, and the matter was remitted to the adjudicating authority for fresh consideration in accordance with law.
  • The petitioner was granted liberty to submit additional replies and supporting documents, and a fresh personal hearing was directed to be afforded before any final order is passed.

Important Clarification

  • Filing of a written reply to a Show Cause Notice, followed by bonafide non-appearance at the personal hearing, does not by itself justify confirming a Section 74 demand without giving the assessee a further opportunity to be heard.
  • Section 75(4) of the CGST Act casts a mandatory obligation on the adjudicating authority to grant a genuine opportunity of personal hearing, and courts will set aside orders passed in its substantial breach, remitting for a fresh, considered decision.

Sections Involved

  • Section 74(1) and (9) of the CGST Act, 2017 — demand and adjudication on grounds of fraud/suppression.
  • Section 75(4) of the CGST Act, 2017 — mandatory opportunity of personal hearing.
  • Section 122(2)(a) of the CGST Act, 2017 — penalty for tax not paid/short paid.
  • Rule 142 of the CGST Rules, 2017 — issuance of summary notices/orders in FORM GST DRC-01/DRC-07.

Decision – In Favour of

The writ petition was allowed, in favour of the petitioner/assessee on procedural grounds, with the impugned order and consequential summaries set aside and the matter remitted for fresh adjudication after a proper hearing.

Case Details

Karnataka High Court; WP No. 35042 of 2025; Coram: Justice S.R. Krishna Kumar; decided on 05.12.2025.

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