The Madras High Court has reaffirmed that ex parte assessments under the CGST Act cannot stand when the assessee had no actual notice due to administrative failures, reinforcing the foundational principle of natural justice in tax proceedings. This judgment provides critical clarity for practitioners handling GST disputes involving cancelled registrations and procedural non-compliance.
Background & Facts
The Dispute
The petitioner, M/s. Abarna Enterprises, represented by its proprietor Nainar Iyappasamy, faced two separate assessment orders issued by the Deputy State Tax Officer, Tuticorin, for the financial year 2021-22. Both orders were passed under the Goods and Services Tax regime and alleged discrepancies in turnover reporting, input tax credit (ITC) claims, and late filing fees. The petitioner challenged both orders through writ petitions, arguing that the assessments were ex parte and violated principles of natural justice.
Key Facts
- The petitioner’s GST registration was cancelled prior to the issuance of the show cause notices
- The cancellation was uploaded on the GST portal, but no personal or physical intimation was provided to the petitioner
- The petitioner was unaware of the show cause notices dated 30.05.2024 (Form DRC-01) and subsequent reminders
- The petitioner attributed the discrepancies to errors by its consultant, not intentional non-compliance
- The petitioner had not participated in the assessment proceedings due to complete lack of notice
- The disputed tax amounts included:
- CGST and SGST of Rs. 59,966 each (total Rs. 1,19,933) on turnover mismatch
- IGST Rs. 3,40,729, CGST Rs. 47,702, SGST Rs. 47,702 (total Rs. 4,36,133) on excess ITC claim
- CGST and SGST late fees of Rs. 3,350 each (total Rs. 6,700)
- 46% of the total disputed tax amount had already been recovered from the petitioner
Procedural History
- 09.10.2025: First assessment order issued under GSTIN 33AATPI7441N1Z5, Form GST DRC-07, Ref No. ZD331025069727A
- 18.12.2025: Second assessment order issued under same GSTIN, Form GST DRC-07, Ref No. ZD331225297113L
- 2026: Writ Petition No. 11353 of 2026 filed challenging the order dated 09.10.2025
- 2026: Writ Petition No. 11374 of 2026 filed challenging the order dated 18.12.2025
- 20.04.2026: Both writ petitions heard together by the Madras High Court, Madurai Bench
The Parties' Positions
For the Petitioner: The petitioner argued that the assessment orders were void ab initio because they were passed without affording a reasonable opportunity of hearing. The cancellation of GST registration and lack of personal notice rendered the notices ineffective. The petitioner was not in wilful default but was a victim of administrative oversight.
For the Respondent: The State contended that notices were issued through the GST portal, which is a legally recognized mode of communication under the CGST Act. The petitioner’s failure to monitor the portal constituted negligence, and the ex parte assessment was therefore valid.
Relief Sought
The petitioner sought quashing of both assessment orders, release of attached bank accounts, and a direction for fresh adjudication with proper opportunity to be heard.
The Legal Issue
The central question was whether an ex parte assessment order under the CGST Act, 2017 can be sustained when the assessee was not personally informed of the show cause notice due to the cancellation of its GST registration and absence of alternative communication channels.
Arguments Presented
For the Petitioner
The petitioner relied on the principle of audi alteram partem and argued that statutory notices must be effectively communicated. Citing State of U.P. v. Mohammad Noor and K. S. Puttaswamy v. Union of India, the petitioner contended that mere upload on the GST portal, without any confirmation of receipt or alternative intimation, does not satisfy the requirement of reasonable notice under Section 73 and Section 74 of the CGST Act. The petitioner emphasized that the cancellation of registration severed the link of communication, making portal-based notices ineffective.
For the Respondent
The respondent argued that Rule 138 of the CGST Rules permits service through the GST portal and that the petitioner’s failure to maintain active access to the portal amounted to contributory negligence. The State contended that the assessment was valid under Section 62 of the CGST Act, which permits ex parte assessments when the taxpayer fails to respond.
The Court's Analysis
The Court examined the nature of the petitioner’s non-appearance and found it was not due to indifference or deliberate avoidance, but due to a systemic failure in communication. The Court noted that the cancellation of GST registration rendered the portal-based notice mechanism inoperative as a means of actual notice.
"The petitioner was unaware of the show cause notice... as the petitioner’s GST Registration was cancelled prior to the issuance of the same and the same was uploaded on GST portal without any further means of intimation."
The Court held that while the portal is a valid mode of service, it cannot be the sole or exclusive mode when the registration is cancelled and no other contact details are available. The State’s reliance on Section 62 was misplaced because that provision presupposes that the assessee has been duly notified and has chosen not to respond. Here, the notice never effectively reached the assessee.
The Court further observed that 46% of the disputed tax had already been recovered, indicating the State’s willingness to enforce liability, but that enforcement must not override the fundamental right to be heard. The Court emphasized that equitable considerations, especially in cases of administrative oversight, warrant a fresh opportunity.
The Verdict
The Court allowed both writ petitions. The order dated 09.10.2025 was quashed. The order dated 18.12.2025 was set aside and the matter remanded to the assessing officer for fresh adjudication. The petitioner must appear before the officer and submit submissions and documents. Any bank account attachment made under the impugned order was directed to be immediately lifted. No costs were awarded.
What This Means For Similar Cases
Notice Must Be Effective, Not Just Technical
- Practitioners must argue that portal-based notices under GST are insufficient if the registration is cancelled and no alternative contact exists
- The burden shifts to the department to prove actual receipt or reasonable efforts to notify via email, post, or personal service
- Mere compliance with Rule 138 does not satisfy audi alteram partem if the mechanism is rendered inoperative by prior administrative action
Ex Parte Assessments Require Genuine Non-Cooperation
- Courts will not uphold ex parte assessments where the taxpayer’s non-appearance stems from lack of notice, not defiance
- The department must distinguish between wilful default and administrative failure
- In cases involving cancelled registrations, the department must proactively attempt alternative communication before proceeding ex parte
Recovery Must Not Preempt Fair Hearing
- Recovery of tax prior to adjudication does not validate procedural illegality
- Recovery orders must be stayed pending fresh hearing if the original assessment is set aside
- Practitioners should immediately move for lifting of attachments upon successful challenge of ex parte orders
