Facts of the Case

The petitioner, trading as Sri Manjunatha Swamy Stone Crushers, was issued a show-cause notice dated 11.07.2024 by the jurisdictional Superintendent of Central Tax. The petitioner did not file any reply. Consequently, the Superintendent passed an order-in-original dated 10.01.2025 under Section 74 of the KGST Act, 2017, confirming a total demand of Rs.48,10,610/- comprising tax, interest and penalty. Recovery proceedings followed, with a notice in Form GST DRC-13 issued on 15.10.2025. The petitioner approached the High Court challenging both the assessment order and the recovery notice.

Issues Involved

  1. Whether an ex parte order confirming a substantial demand under Section 74 should be set aside where the petitioner shows bona fide reasons for its earlier failure to respond.
  2. Whether the recovery notice issued pursuant to such an order can survive if the underlying order is set aside.

Petitioner's Arguments

  • Due to bona fide reasons and unavoidable circumstances, the petitioner could not submit a reply or documents to the show-cause notice and consequently did not contest the proceedings.
  • If given one more opportunity, the petitioner would file a proper reply and contest the demand on merits.

Respondent's Arguments

  • There was no merit in the petition, and it deserved to be dismissed since the petitioner had simply failed to respond to a validly issued notice.

Court Order / Findings

  • The Court adopted a justice-oriented approach, noting the petitioner's specific assertion of bona fide inability to respond earlier.
  • The order-in-original dated 10.01.2025 was set aside and the matter remitted to the adjudicating authority for reconsideration afresh from the stage of the petitioner filing its reply to the show-cause notice.
  • Liberty was reserved to the petitioner to file replies and supporting documents, which the authority must consider after affording sufficient and reasonable opportunity of hearing.

Important Clarification

  • Courts exercising writ jurisdiction may set aside an ex parte Section 74 order and grant a fresh opportunity where the assessee demonstrates a genuine, bona fide reason for its earlier default, balancing the interest of justice against the finality of adjudication.
  • Such relief is typically conditional on the assessee actually cooperating and filing its reply promptly once the matter is remitted.

Sections Involved

  • Section 74, KGST Act, 2017 — determination of tax not paid by reason of fraud, wilful misstatement or suppression.
  • Form GST DRC-13 — notice to a third person for recovery of confirmed tax dues.

Decision – In Favour of

The order is in favour of the Assessee. The ex parte demand was set aside and the matter remitted for a fresh decision on merits after affording a hearing.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 35043 of 2025 (T-RES)
Neutral Citation: 2025:KHC:48287
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 21st November, 2025

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