GST Update

Desk of CA. Praveen Sharma – 1053 Series (CAPS) 

Karnataka High Court IN THE CASE OF M/s Paxal Fuel Corporation v. The Deputy Commissioner of Commercial Taxes

Karnataka High Court Quashes GST Assessment Due to Improper Service of Show Cause Notice

In an important ruling, the Karnataka High Court held that a GST assessment cannot be sustained if the taxpayer is not properly served with a Show Cause Notice (SCN) before the order is passed.

In this case, the GST department issued an assessment order under Section 73 raising a demand of over ?1.13 crore against M/s Paxal Fuel Corporation. The department claimed that the SCN had been sent through email. However, the taxpayer argued that it never received the notice and came to know about it only after the assessment order was passed.

The High Court observed that merely claiming to have sent the notice is not enough. A taxpayer must receive a meaningful opportunity to reply before any adverse order is passed. The Court also clarified that phone calls or other informal communication cannot replace the statutory requirement of serving an SCN.

Accordingly, the Court quashed the assessment order and restored the matter to the SCN stage. The taxpayer was allowed to file a detailed reply, and the GST department was directed to pass a fresh order after considering the reply in accordance with law.

The judgment reinforces that proper service of an SCN and adherence to the principles of natural justice are mandatory before completing proceedings under Section 73 of the GST law.

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CAPS