Facts of the Case

The Petitioner, Exide Industries Limited, filed a writ petition under Articles 226 and 227 of the Constitution of India challenging the adjudication order dated 3rd February 2025 and the consequential Form GST DRC-07 dated 4th February 2025 issued by the Respondent authority.

The dispute arose from allegations that the Petitioner had availed ineligible Input Tax Credit (ITC), leading to a substantial demand exceeding ₹12 crores along with penalties.

A Show Cause Notice (SCN) dated 17th May 2024 was issued, to which the Petitioner responded on 10th June 2024. Multiple personal hearing notices were subsequently issued; however, the Petitioner contended that either such notices were not received or were received on the date of hearing itself, thereby preventing effective participation.

Despite attempts by the Petitioner to approach the Respondent’s office, the impugned order was passed without granting a proper hearing.

Issues Involved

  1. Whether the adjudication order passed without granting an effective opportunity of hearing violates the principles of natural justice.
  2. Whether repeated adjournments or laxity on the part of the Petitioner justifies denial of a fair hearing.
  3. Whether the demand raised on account of alleged ineligible ITC can sustain in absence of procedural fairness.

Petitioner’s Arguments

  • The Petitioner argued that no effective opportunity of personal hearing was granted.
  • Notices for hearing were either not received or received on the same day, making compliance impossible.
  • The impugned order was passed in violation of audi alteram partem (right to be heard).
  • The Petitioner had made bona fide efforts to participate in proceedings by visiting the Respondent’s office. 

Respondent’s Arguments

  • The Respondent contended that multiple opportunities of hearing were granted.
  • It was argued that there was laxity on the part of the Petitioner in attending hearings and seeking adjournments.
  • The adjudication order was passed after due consideration of the material on record.

Court’s Findings / Order

The Delhi High Court observed that:

  • Although there was laxity on the part of the Petitioner, the Respondent also failed to ensure that an effective hearing was granted.
  • Passing a detailed order involving a substantial demand exceeding ₹12 crores without proper hearing amounts to violation of principles of natural justice.

Final Directions:

  • The impugned order dated 3rd February 2025 was set aside.
  • The matter was remanded back for fresh adjudication after granting proper hearing.
  • The Petitioner was directed to pay ₹1,00,000 as costs to the Delhi High Court Bar Association.
  • The Respondent was directed to provide at least five working days’ advance notice for the hearing.
  • No adjournment shall be sought by the Petitioner in future proceedings.
  • The limitation period under Section 75(3) of the CGST Act, 2017 shall not apply due to repeated adjournments.

Important Clarifications by the Court

  • Even where the assessee shows negligence or seeks adjournments, complete denial of hearing is impermissible.
  • Authorities must balance procedural discipline with fair opportunity principles.
  • Imposition of costs can be used as a tool to address litigant laxity while preserving justice.
  • Relaxation of limitation under Section 75(3) CGST Act may be justified in exceptional circumstances. 

Sections Involved

  • Article 226 & 227 of the Constitution of India
  • Section 75(3), Central Goods and Services Tax Act, 2017
  • Principles of Natural Justice (Audi Alteram Partem)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS17042025CW48222025_111003.pdf

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