Facts of the Case

The petitioner, a partnership firm dealing in lubricants, was issued a show cause notice dated 27.09.2023 by the Assistant Commissioner of Commercial Taxes (Audit) under Section 73 of the CGST/KGST Act for the financial year 2017-18. The petitioner filed its detailed reply on 11.10.2023 within the time allowed. Without considering that reply and without providing an opportunity of personal hearing, the respondent proceeded to pass the impugned order dated 31.10.2023, accompanied by a corresponding demand in Form GST DRC-07, which the petitioner challenged before the Karnataka High Court under Articles 226 and 227 of the Constitution.

Issues Involved

  1. Whether a Section 73 demand order passed without considering the assessee's reply and without affording an opportunity of personal hearing violates the principles of natural justice.
  2. Whether such an order is liable to be set aside on that ground alone, regardless of the merits of the underlying demand.

Petitioner's Arguments

  • The respondent passed the impugned order without considering the reply dated 11.10.2023 and without granting an opportunity of personal hearing, warranting that the order be quashed and the matter remitted for fresh consideration from the stage of the reply.

Respondent's Arguments

  • The HCGP supported the impugned order and submitted that there was no merit in the petition, which was liable to be dismissed.

Court Order / Findings

  • On perusal of the material, including the impugned order, the Court found that it had indeed been passed without considering the reply filed by the petitioner and without granting an opportunity to produce necessary documents.
  • Adopting a justice-oriented approach, the Court set aside the impugned order and remitted the matter for reconsideration afresh in accordance with law.
  • The respondent was directed to consider the reply dated 11.10.2023, and the petitioner was directed to appear on a fixed date with any additional reply or documents, following which a reasonable opportunity of personal hearing was to be afforded before a fresh order.

Important Clarification

  • A Section 73 demand order passed without considering the reply already on record and without affording an opportunity of personal hearing is a clear violation of the principles of natural justice, and is liable to be set aside on that ground alone — independent of whether the underlying tax demand might otherwise be justified.
  • The appropriate remedy in such cases is remand for fresh adjudication from the stage of considering the existing reply, coupled with a mandatory personal hearing, rather than the writ court deciding the tax dispute itself.

Sections Involved

  • Section 73, CGST/KGST Act, 2017 — determination of tax not paid, short paid, or input tax credit wrongly availed (non-fraud cases).
  • Principles of natural justice and the right to personal hearing implicit in adjudication under the CGST Act, 2017.

Decision – In Favour of

In favour of the Assessee. The impugned order was set aside and the matter remitted for fresh adjudication after considering the reply and granting a personal hearing.

Case Details

High Court of Karnataka at Bengaluru; WP No.372 of 2024 (T-RES); Neutral Citation: 2025:KHC:49475; Coram: Hon'ble Mr. Justice S.R. Krishna Kumar; Date of Order: 27.11.2025.

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.