Facts of the Case

The petitioner, M/s Kodagu Nirmithi Kendra, a company registered under the KSR Act, 1960, challenged an order and summary of order in Form GST DRC-07 dated 26.04.2023, passed by the Assistant Commissioner of Commercial Taxes (Audit), Madikeri, under Section 73 of the CGST/KGST Act, 2017, demanding Rs.5,74,19,379. The proceedings had commenced with a pre-intimation in Form GST DRC-01A dated 21.12.2022, followed by a show cause notice dated 14.02.2023 demanding Rs.2,84,82,143, with 30 days to reply. The petitioner sought an additional week to reply on 23.03.2023 but ultimately could not submit any reply, as its officers were engaged in election duties, leading to an ex-parte order confirming the full demand without any personal hearing.

Issues Involved

  1. Whether an ex-parte GST demand order confirming a substantial sum, passed without granting any opportunity of personal hearing after the taxpayer's bona fide inability to reply, deserves to be set aside.
  2. What safeguards should accompany a remand in such circumstances.

Petitioner's Arguments

  • The petitioner's officers were engaged in election duties and could not consult and finalise a reply within the time available, despite requesting additional time and an opportunity of hearing over phone.
  • The inability to submit replies to both the pre-intimation and the show cause notice was due to bona fide reasons, unavoidable circumstances and sufficient cause, and one further opportunity would allow the petitioner to properly contest the proceedings.

Respondent's Arguments

  • The Additional Government Advocate submitted that there was no merit in the petition and that it was liable to be dismissed, without substantively disputing the petitioner's assertion of election-duty constraints.

Court Order / Findings

  • The Court accepted that the petitioner's failure to reply and contest the proceedings was attributable to bona fide reasons, unavoidable circumstances and sufficient cause arising from its officers' election duty engagements, resulting in the impugned ex-parte order confirming the entire demand without any personal hearing.
  • Adopting a justice-oriented approach, the Court set aside the impugned order and summary of order in Form GST DRC-07 dated 26.04.2023, and remitted the matter back to the assessing authority for fresh consideration from the stage of the petitioner submitting its reply to the show cause notice dated 14.02.2023.
  • Liberty was reserved for the petitioner to submit replies and documents, which the authority must consider after affording sufficient and reasonable opportunity of hearing before proceeding further in accordance with law.

Important Clarification

  • Where a taxpayer demonstrates a genuine, bona fide reason (such as key personnel being deployed on election duty) for failing to respond to a GST show cause notice, courts may set aside even a large ex-parte demand and remit the matter for fresh consideration from the reply stage, rather than treating the default as fatal.
  • Such relief is contingent on the taxpayer being given, and availing, a genuine opportunity of personal hearing on remand.

Sections Involved

  • Section 73, CGST/KGST Act, 2017 – determination of tax not paid, other than fraud cases.
  • Form GST DRC-01A and DRC-07, CGST Rules, 2017 – pre-intimation of tax liability and summary of the final order.

Decision – In Favour of

In favour of the assessee — the demand order was set aside and the matter remitted for fresh consideration with a genuine opportunity of hearing.

Case Details

High Court of Karnataka at Bengaluru; WRIT PETITION NO. 16531 OF 2023 (T-RES); Coram: Hon'ble Mr Justice S.R. Krishna Kumar; Date: 29.10.2025.

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