Facts of the Case

M/s. CMN Metal Mart was issued a pre-intimation in Form DRC-01A dated 13.12.2024, to which it submitted a partial reply on 20.12.2024. The respondent thereafter issued a show cause notice dated 07.01.2025 under Section 74A of the KGST Act. Since the petitioner did not submit a reply to the show cause notice, the respondent proceeded to confirm the demand raised therein by an Order-in-Original dated 01.04.2025.

Issues Involved

  1. Whether the ex-parte confirmation of demand, following the petitioner's failure to reply to the show cause notice, ought to be set aside in view of the bona fide reasons offered for such omission.
  2. Whether the matter warranted remittal to the stage of the show cause notice for a fresh opportunity to be heard.

Petitioner's Arguments

  • The petitioner's inability and omission to submit a reply and contest the proceedings was attributable to bona fide reasons, unavoidable circumstances and sufficient cause, warranting a further opportunity.

Respondent's Arguments

  • The learned HCGP submitted that there was no merit in the petition and that it was liable to be dismissed.

Court Order / Findings

  • Though several contentions were urged by both sides, the Court, having regard to the petitioner's specific assertion of bona fide reasons for non-response, adopted a justice-oriented approach and decided to provide one more opportunity to the petitioner.
  • The impugned order dated 01.04.2025 under Section 74(9) read with Section 74(5) of the CGST/KGST Act was set aside, and the matter was remitted for reconsideration afresh from the stage of the petitioner submitting its reply to the show cause notice dated 07.01.2025.
  • The petitioner was directed to appear before the first respondent on 19.01.2026 without awaiting further notice, and was granted liberty to submit replies and documents.
  • It was made clear that if the petitioner failed to appear on the specified date, the order would stand automatically recalled without further orders.

Important Clarification

  • Even where a taxpayer has failed to reply to a Section 74/74A show cause notice, courts may adopt a "justice-oriented approach" and set aside the resultant ex-parte demand where the taxpayer demonstrates bona fide reasons for the default — but such relief is typically conditioned on strict compliance with a fixed appearance date, failing which the benefit lapses automatically.

Sections Involved

  • Section 74A of the KGST Act — the show cause notice provision applied here.
  • Section 74(9) read with Section 74(5) of the CGST/KGST Act, 2017 — governs confirmation of demand following adjudication.

Decision – In Favour of

Assessee. The ex-parte order was set aside and the matter remitted for a fresh opportunity to respond to the show cause notice.

Case Details

High Court of Karnataka at Bengaluru; WP No. 36321 of 2025 (T-RES); Coram: Justice S.R. Krishna Kumar; Order dated 10.12.2025.

Link to Download the Order

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