Facts of the Case

The department initiated proceedings under Section 74 of the CGST/KGST Act, 2017 and issued a show-cause notice dated 11.11.2022 in Form GST DRC-01 calling for an explanation regarding several discrepancies for the years 2017-18, 2018-19 and 2019-20. The petitioner filed its reply dated 16.12.2022, but the respondent, without considering the reply and without granting a sufficient opportunity of personal hearing under Section 75(4), passed the impugned Order-in-Original dated 24.01.2025.

Issues Involved

  1. Whether an order under Section 74 passed without considering the assessee's reply and without a reasonable opportunity of personal hearing under Section 75(4) can be sustained.

Petitioner's Arguments

  • The impugned order deserved to be quashed and the matter remitted for reconsideration afresh, with an opportunity to submit a reply and produce necessary documents.

Respondent's Arguments

  • There was no merit in the petition and it was liable to be dismissed, especially since the petitioner did not exercise due diligence in participating in the proceedings.

Court Order / Findings

  • It was an undisputed fact on record that the petitioner had filed its reply to the show-cause notice, yet the impugned order was passed without granting the petitioner an opportunity to produce necessary supporting documents.
  • Adopting a justice-oriented approach and to provide one more opportunity, the Court set aside the impugned order and remitted the matter for reconsideration, directing the petitioner to appear on a fixed date with its reply and relevant documents, whereafter the respondent was to afford a reasonable opportunity, hear the petitioner and proceed in accordance with law.
  • It was made clear that if the petitioner failed to appear as directed, the order would stand automatically recalled without further reference to the Bench.

Important Clarification

  • Where a taxpayer has filed a reply to a Section 74 show-cause notice, an order passed without affording a reasonable opportunity to produce supporting documents and without a proper personal hearing under Section 75(4) is liable to be set aside, even at the preliminary hearing stage of the writ.

Sections Involved

  • Section 74, CGST/KGST Act, 2017 -- determination of tax not paid by reason of fraud, wilful misstatement or suppression of facts.
  • Section 75(4), CGST Act, 2017 -- mandatory opportunity of personal hearing.
  • Form GST DRC-01 -- summary of show-cause notice.

Decision – In Favour of

Assessee. The order was set aside and the matter remitted with directions to afford a fresh opportunity of reply, document production and personal hearing.

Case Details

High Court of Karnataka at Bengaluru; Writ Petition No. 31478 of 2025 (T-RES); Coram: Justice S.R. Krishna Kumar; Order dated 03.11.2025.

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