M/s Business Aircraft Management Services Pvt. Ltd. v. State of Karnataka

Facts of the Case

The petitioner was subjected to proceedings under Section 73 of the KGST Act, 2017, culminating in an ex-parte assessment order confirming a demand of ₹16,15,303/- comprising tax, interest, and penalty. Consequential recovery action was initiated, including freezing of the petitioner’s bank account through Form GST DRC-13.

Although statutory notices—pre-intimation, intimation under Form GST DRC-01A, and show cause notice—were technically generated on the GST portal, the petitioner asserted that these communications were never effectively served, as they were allegedly diverted to the junk folder of the registered email account. As a result, the petitioner remained unaware of the proceedings and could not submit replies or contest the demand.

 

Issues Involved

  1. Whether an ex-parte assessment under Section 73 of the KGST Act is sustainable where statutory notices are technically issued but not effectively served.
  2. Whether procedural compliance through portal-based issuance can substitute actual and meaningful service of notice.
  3. Whether denial of effective opportunity of hearing vitiates GST adjudication proceedings involving serious civil consequences.

 

Petitioner’s Arguments

The petitioner contended that non-participation in the adjudication proceedings was neither intentional nor negligent but was caused by bona fide and unavoidable circumstances. It was submitted that notices routed to the junk email folder did not amount to effective service, resulting in denial of a real opportunity to respond. The petitioner sought quashing of the ex-parte order and prayed for fresh adjudication on merits.

 

Respondent’s Arguments

The State argued that notices were duly generated on the GST portal in accordance with statutory procedure and that the petitioner’s failure to respond could not invalidate the assessment. It was contended that procedural compliance was sufficient and that the impugned order did not warrant interference.

 

Court’s Findings and Order

The Karnataka High Court emphatically reaffirmed that principles of natural justice prevail over procedural formalism under the GST framework. The Court held that while statutory notices may have been technically generated on the GST portal, such issuance by itself does not amount to effective service, particularly when serious civil consequences ensue.

The Court observed that mere technical compliance with notice issuance cannot substitute effective and meaningful service. Adopting a justice-oriented and pragmatic approach, the High Court accepted the petitioner’s explanation as constituting sufficient cause and held that denial of opportunity in such circumstances vitiates the adjudication process.

Accordingly, the Court:

  • Set aside the ex-parte assessment order passed under Section 73 of the KGST Act;
  • Remitted the matter for fresh adjudication from the stage of reply to the show cause notice;
  • Directed the authorities to ensure proper service of notices and grant adequate opportunity of hearing before passing fresh orders;
  • Clarified that recovery already effected would remain subject to the final outcome of the proceedings.

 

Important Clarification and Jurisprudential Significance

This ruling makes a significant contribution to evolving GST jurisprudence by reiterating that efficient and technology-driven tax administration must operate in consonance with constitutional guarantees of fairness, reasonableness, and due process.

The Court underscored that statutory authorities cannot act in a manner divorced from the foundational principles of natural justice, even within an automated or portal-based regime. The decision reinforces that GST adjudication must ensure not only procedural compliance but also substantive fairness and real opportunity of hearing, thereby strengthening taxpayer protections against mechanical and ex-parte assessments.

LINK TO DOWNLOAD THE ORDER
https://mytaxexpert.co.in/uploads/1768559324_KarnatakaHighCourtBusinessAircraftManagement1768506750.pdf 

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.