Facts of the Case

M/S KMC Constructions Ltd, for tax period 2017-18, was issued an intimation notice and thereafter a show-cause notice in Form GST DRC-01 under Section 74 of the CGST/KGST Act, 2017 dated 13.10.2023, calling for an explanation regarding discrepancies in tax liability. The petitioner filed its reply dated 27.10.2023. However, the respondent proceeded to pass the impugned order dated 05.02.2025 (Order No. 150/2024-25/ED3) without considering this reply and without providing an opportunity of personal hearing under Section 75(4).

Issues Involved

  1. Whether an order under Section 74 that is passed without considering the assessee's timely-filed reply and without granting a personal hearing under Section 75(4) is sustainable.
  2. What relief is appropriate given the petitioner had, unlike in many comparable cases, actually engaged with the process by filing a reply.

Petitioner's Arguments

  • Had duly filed its reply to the show-cause notice dated 13.10.2023, yet the respondent passed the impugned order without considering that reply and without granting any opportunity of personal hearing.
  • Sought quashing and remand with a further opportunity to submit documents and be heard.

Respondent's Arguments

  • Supported the impugned order, submitting there was no merit in the petition, particularly since the petitioner had not exercised due diligence in participating in the proceedings.

Court Order / Findings

  • On a perusal of the record, the Court found it undisputed that the petitioner had indeed filed its reply, yet the impugned order was passed without granting an opportunity to produce necessary documents or a personal hearing.
  • Adopting a "justice-oriented approach," the Court set aside the impugned order dated 05.02.2025 and remitted the matter to the respondent for reconsideration afresh, directing the petitioner to appear on 11.12.2025 to submit its reply along with relevant documents, upon which the respondent was to afford a reasonable opportunity of hearing and proceed in accordance with law.
  • Non-appearance on the fixed date would result in automatic recall of the order.

Important Clarification

  • Where an assessee has actually filed a timely reply to a Section 74 show-cause notice, an order passed without considering that reply and without a personal hearing under Section 75(4) is set aside as a matter of course.
  • The assessee's diligence in responding to the notice strengthens, rather than merely mirrors, the natural-justice violation compared to cases of outright non-response.

Sections Involved

  • Section 74, CGST/KGST Act, 2017 — determination of tax by reason of fraud/wilful misstatement, under which the show-cause notice and order were issued.
  • Section 75(4), CGST Act, 2017 — mandatory personal hearing before an adverse order.

Decision – In Favour of

The decision is in favour of the assessee. The impugned order was set aside and the matter remanded for fresh consideration with a hearing.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 33827 of 2025 (T-RES); NC: 2025:KHC:47206
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 13th November 2025

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