Facts of the Case

M/s Trimurti Polychem Pvt. Ltd. challenged a recovery notice dated 11 November 2025 issued by the Superintendent of Central Tax, along with the underlying Order-in-Original dated 5 February 2025 passed under Section 74 of the KGST/CGST Act, 2017, confirming a total demand of nearly Rs. 2.98 crore including tax, interest and penalty, and the show cause notice dated 7 August 2020 on which that order was based. The petitioner did not submit any reply to the 2020 show cause notice, resulting in the demand being confirmed ex-parte, and it approached the High Court after being served with the recovery notice more than five years later.

Issues Involved

  1. Whether an ex-parte order confirming a substantial demand under Section 74 of the CGST/KGST Act should be set aside where the taxpayer claims bona fide inability to respond to the show cause notice.
  2. Whether a taxpayer's long silence over several years before challenging a Section 74 order affects the grant of a fresh opportunity to be heard.

Petitioner's Arguments

  • The failure to respond to the 2020 show cause notice was due to bona fide reasons, unavoidable circumstances and sufficient cause, and not a deliberate attempt to evade proceedings.
  • If granted one further opportunity by setting aside the impugned order, the petitioner would file a reply and contest the demand on merits.

Respondent's Arguments

  • No merit existed in the petition and it deserved to be dismissed, given the petitioner's prolonged failure to respond to the show cause notice and contest the proceedings.

Court Order / Findings

  • The Court, adopting a justice-oriented approach, accepted the petitioner's specific assertion of bona fide inability to respond as sufficient cause for a fresh opportunity.
  • It held that the impugned order dated 05.02.2025 under Section 74 deserved to be set aside and the matter remitted for reconsideration afresh from the stage of the petitioner submitting its reply to the 2020 show cause notice.
  • The petitioner was directed to appear before the assessing authority on a fixed date without awaiting further notice, with liberty to submit replies and documents, failing which the order would stand automatically recalled.

Important Clarification

  • Even a large, long-standing ex-parte demand under Section 74 can be set aside for want of a genuine opportunity of hearing, provided the taxpayer offers a bona fide explanation and undertakes to contest the show cause notice on merits.
  • Such relief is conditional and self-executing — failure to appear on the appointed date automatically revives the original order without any further judicial intervention.

Sections Involved

  • Section 74, CGST/KGST Act, 2017 – determination of tax involving fraud, wilful misstatement or suppression of facts, and the resultant higher penalty exposure.
  • Form GST DRC-07 – summary of the demand order communicated to the taxpayer.

Decision – In Favour of

The decision is in favour of the assessee, with the ex-parte demand order set aside and the matter remanded for adjudication after affording a genuine opportunity of hearing.

Case Details

Court: High Court of Karnataka at Bengaluru. Case No.: Writ Petition No. 38037 of 2025 (T-RES). Coram: Hon'ble Mr. Justice S.R. Krishna Kumar. Date of Order: 17 December 2025.

Link to Download the Order

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