Facts of the Case

Chandan Kanyalal Dhanani, a practising Chartered Accountant, was sent enquiry letters and summons between 30.09.2020 and 31.03.2021 seeking documents — work orders, Form 26AS, invoices, income tax returns and balance sheets — for FY 2015-16 to 2017-18. Receiving no response, the department issued a show-cause notice dated 26.04.2021, and on continued non-response passed an Order-in-Original dated 27.02.2023 confirming a demand of Rs.7,02,364 including tax, interest and penalty. Recovery was later pursued through a Form GST DRC-13 notice dated 31.03.2025 issued to the petitioner's bankers, freezing his accounts. The petitioner approached the Karnataka High Court, stating he became aware of the proceedings only upon receiving a letter dated 25.04.2025 and had never received any of the earlier correspondence or the show-cause notice.

Issues Involved

  1. Whether non-receipt of the enquiry letters and show-cause notice, resulting in an ex parte confirmation of demand, warrants setting aside the order and affording a fresh opportunity.
  2. Whether the consequent bank-recovery notice in Form GST DRC-13 should also be set aside as a result.

Petitioner's Arguments

  • He never received any of the correspondence and learnt of the proceedings only upon receiving the letter dated 25.04.2025, which is why he could neither respond to the enquiry nor the show-cause notice nor contest the demand.
  • His failure to respond was due to bonafide reasons and unavoidable circumstances, and he sought one more opportunity to reply and contest the matter on merits by setting aside the ex parte order and the bank freeze.

Respondent's Arguments

  • The learned HCGP submitted that there was no merit in the petition and that it deserved to be dismissed, without specifically rebutting the petitioner's claim of non-service.

Court Order / Findings

  • Accepting the petitioner's specific assertion that his inability to respond was due to bonafide reasons and unavoidable circumstances, the Court adopted a "justice-oriented approach."
  • Both the Order-in-Original dated 27.02.2023 and the Form GST DRC-13 recovery notice dated 31.03.2025 were set aside, and the matter was remitted to the department for fresh consideration from the stage of the petitioner filing his reply to the 26.04.2021 show-cause notice.
  • The petitioner was directed to appear on a fixed date (21.11.2025) without awaiting further notice, with liberty to submit replies and documents to be duly considered after a reasonable hearing.
  • Non-appearance on the fixed date would automatically recall the relief granted, reviving the impugned order.

Important Clarification

  • Courts are willing to set aside even a confirmed ex parte GST demand and the connected coercive bank-recovery action under Form GST DRC-13, and grant a fresh opportunity to reply, where the taxpayer credibly asserts non-receipt of the underlying notices.
  • Such relief is conditional — the taxpayer must commit to appearing and contesting the matter on a fixed date, failing which the relief automatically lapses and the original order revives.

Sections Involved

  • Section 73/74, CGST Act, 2017 — the assessment provisions under which the confirmed demand of tax, interest and penalty arose.
  • Rule 142, CGST Rules, 2017 — governs issuance of show-cause notice and order summaries, and prescribes Form GST DRC-13 for recovery from a third party such as a bank.
  • Section 79, CGST Act, 2017 — modes of recovery of tax, including recovery via third-party bank accounts.

Decision – In Favour of

The decision is in favour of the assessee. The Order-in-Original and the bank-recovery notice were set aside and the matter remitted for fresh consideration on terms.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 25118 of 2025 (T-RES); NC: 2025:KHC:41778
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 17th October 2025

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