Facts of the Case

The petitioner challenged an order dated 22.08.2024 confirming a GST demand for the tax period 2019-20, preceded by a show-cause notice in DRC-01 dated 25.05.2024 and three personal hearing notices (28.06.2024, 11.07.2024 and 25.07.2024), none of which the petitioner responded to, resulting in the demand being confirmed.

Issues Involved

  1. Whether an ex parte order confirming a demand under Section 73, where the petitioner failed to respond to a properly issued show-cause notice and three hearing notices, should nevertheless be set aside on terms, consistent with the Court's practice in similar matters.

Petitioner's Arguments

  • The Writ Petition was disposed of with the consent of both counsel, seeking one more opportunity to respond and be heard on merits.

Respondent's Arguments

  • The demand had been confirmed only after DRC-01 and three separate personal hearing notices, none of which drew any response from the petitioner.

Court Order / Findings

  • The Court noted its consistent practice, under similar circumstances, of coming to the assistance of taxpayers in this position by quashing the impugned order on terms, finding no reason to depart from that approach here.
  • The order was quashed subject to the petitioner depositing 25% of the disputed tax in cash from its Electronic Cash Register within thirty days, and filing a reply to the DRC-01 notice, treating the impugned order as an addendum to the show-cause notice.
  • On compliance, the respondent was directed to pass fresh orders on merits after hearing the petitioner within three months; failing compliance, the respondent was at liberty to proceed as if the writ petition had been dismissed in limine.

Important Clarification

  • Even where a taxpayer has ignored a show-cause notice and multiple personal hearing notices, the Madras High Court's Madurai Bench has adopted a consistent practice of granting one further opportunity by quashing the confirmed demand on terms -- typically a 25% cash deposit of the disputed tax -- rather than shutting out the taxpayer altogether.
  • In such conditional-quashing orders, the earlier order is treated as an addendum to the original show-cause notice, so the taxpayer must file a substantive reply, not merely make the deposit.

Sections Involved

  • Section 73, CGST/TNGST Act, 2017 -- determination of tax not paid, other than by reason of fraud.
  • Form GST DRC-01 -- summary of show-cause notice.

Decision – In Favour of

Assessee (conditional). The confirmed demand was quashed on terms of a 25% cash deposit and filing of a reply, with fresh orders to follow after hearing.

Case Details

Madurai Bench of the Madras High Court; W.P.(MD) No. 19231 of 2025 & W.M.P.(MD) No.14778 of 2025; Coram: Justice C. Saravanan; Order dated 16.07.2025.

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