A reply the department acknowledged receiving and then ignored makes the GST order unsustainable
A Division Bench of Justices Sanjeeb K Panigrahi and Murahari Sri Raman set aside a Section 74 GST order and remitted it, with the proceeding to conclude in eight weeks.
A proprietor who filed his reply to a GST show cause notice and got an official acknowledgment stamped on it has had the resulting demand order set aside, because the officer who acknowledged the reply then passed the order without considering it. A Division Bench of Dr. Justice Sanjeeb K Panigrahi and Justice Murahari Sri Raman held that ignoring a physically acknowledged receipt of a reply is a patent violation of the principles of natural justice, and remitted the matter for fresh consideration on a tight timetable. The judgment was authored by Justice Murahari Sri Raman.
Eight days between the reply and the order
M/s. Chandan Patra, a proprietorship at Bhubaneswar, challenged an Order-in-Original passed on 4 February 2026 by the Superintendent, GST and Central Excise, Bhubaneswar VII Range, in exercise of power under Section 74 of the Central Goods and Services Tax Act. Section 74 is the provision for determining tax not paid or short paid, or input tax credit wrongly availed, where fraud or wilful misstatement or suppression of facts is alleged — the harsher of the two determination routes, carrying a longer limitation period and heavier penalty than Section 73.
The underlying liability concerned works contract service. The petitioner, registered under the GST Act and engaged in executing works contracts, had carried out work in 2019-20 under the Executive Engineer, Bhanjanagar Irrigation Division, for improvement to a right flood bank, receiving Rs 26,36,189. Its position on liability was that the work fell squarely within Notification No. 31/2017-Central Tax (Rate) issued by the Department of Revenue, so that the transaction attracted GST at 5 per cent.
The proceeding began with a Demand-cum-Show Cause Notice dated 4 September 2025, accompanied by Form GST DRC-01 dated 10 September 2025, and the demand carried interest under Section 50(1). On 8 January 2026 the Superintendent issued a reminder directing the petitioner to file documents and a reply by 26 January and fixing a personal hearing for 27 January 2026.
The petitioner did appear on 27 January 2026 and filed a detailed reply, which the authority received manually on that date. In the course of that hearing he explained the Notification point, and on the Superintendent's own instruction to produce copies of Form 26AS, time to furnish further documents was granted until 13 February 2026. The reply went on the record as Annexure-8, with an official acknowledgment of receipt on its face. The Order-in-Original followed on 4 February 2026.
The State's counsel did not dispute the acknowledgment, and the Bench recorded that it could not be disputed. That left a short and unanswerable point: the document creates an undeniable record that the Superintendent was in possession of the petitioner's explanation and objection before passing the order, and the order was passed without taking those objections into account.
Two dates that do not fit the order
Counsel for the petitioner, Sri Choudhury Satyajit Misra, put two documents against the order. The first was the time the Superintendent himself had allowed. Having granted until 13 February 2026 to furnish the required documents during the hearing of 27 January, no final decision could be taken on 4 February. A document on the record styled “Hazira” and dated 13 February 2026 showed that the documents sought at the hearing were in fact received by the Superintendent on that date — nine days after the order had already been passed.
The second was the order's own recital. Paragraph 4.0 of the Order-in-Original, headed as the record of personal hearing and written defence, states that the noticee failed to appear on any of the scheduled dates and could not produce a reply to the show cause notice on the GST portal in Form DRC-06, and that in the absence of any written submission or appearance the adjudicating authority had no option but to decide the case on the records available.
The department's answer, as the judgment records it, was that having issued the notice and then a reminder, and having afforded audi alteram partem on 27 January 2026, the principles of natural justice could not be said to have been transgressed. The difficulty is that the reply had come in over the counter rather than through Form DRC-06 on the portal, and the order proceeded as though it did not exist.
What the Bench held, and what it declined to decide
Tested against that record, the judgment holds there was a glaring erroneous approach on the part of the Superintendent in not adhering to the norms of natural justice. Ignoring a physically acknowledged receipt of a reply amounts to a patent violation of those principles, and the Order-in-Original could not be sustained.
Before reaching that conclusion the Bench worked through the law at length. On the first limb of natural justice it traced nemo judex in causa sua to its origin in English law and discussed Krishnadatt Awasthy among others. On the second limb, the right to be heard, it went through Mohinder Singh Gill, Swadeshi Cotton Mills, State Bank of Patiala and Dharampal Satyapal Ltd., along with a more recent decision of the Supreme Court and a five-Judge Bench decision of its own court in CORE. It restated the familiar caution that the principle of natural justice is no unruly horse, and observed that natural justice principles breathe reasonableness into procedure.
On maintainability it recorded that the question is no longer res integra, setting out the principles that emerge, the High Court's discretion not to entertain a writ petition where an alternative remedy exists, and the recognised exceptions to that rule, with reference to Kesari Nandan Mobile among other authorities.
What the Bench then did is as instructive as what it held. It did not decide the two substantive challenges the petitioner had raised to the Superintendent's jurisdiction — that the Section 74 proceeding was barred by limitation, and that the ingredients for exercising that power were absent. Those were expressly left open for the petitioner to raise before the authorities concerned, in the light of the observations in Commissioner of Central Excise vs Krishna Wax Private Limited, (2020) 12 SCC 572.
The reason sits in a passage on the limits of writ jurisdiction. It is settled, the Bench recorded, that where disputed questions of fact are involved, a petition under Article 226 is not the proper remedy. Powers of judicial review can always be exercised by a writ court, but where disputed facts need adjudication, it is best left to the competent forum to adjudicate them by examining the evidence brought on record before findings are returned. The judgment also notes, on the march of administrative law since the Constitution was enacted, that an age-old principle may not hold good in all circumstances.
The two questions left open are the ones that decide whether this proceeding should exist at all. Section 74 is not the ordinary route. It is available only where tax has gone unpaid or short paid, or input tax credit has been wrongly availed or utilised, by reason of fraud, wilful misstatement or suppression of facts, and it is that allegation which buys the revenue the longer limitation period and the heavier penalty. The petitioner's case was that the ingredients for exercising the power were absent — his position being that the works contract fell under a rate notification and attracted 5 per cent — and that the proceeding was in any event barred by limitation.
Both of those are questions the adjudicating authority must now decide on a reply it has, this time, read. The reference to Krishna Wax marks the point: whether a show cause notice should have been issued at all is a matter for the authority seised of the proceeding, and the High Court's refusal to pronounce on it leaves the petitioner no worse off, because the challenge survives for the fresh hearing.
The directions, and the clock
The matter was remitted to the Superintendent, GST and Central Excise, Bhubaneswar VII Range, for fresh consideration of both the jurisdiction objection and the reply to the Demand-cum-Show Cause Notice of 4 September 2025. Liberty was reserved to the petitioner to raise all objections and pleas available in law and to file documents and evidence in support.
The timetable is specific. The petitioner must appear before the Superintendent within fifteen days of receiving a certified copy of the judgment. The authority is to fix a date of hearing and take on record all material particulars made available to it. The petitioner is to cooperate so that the entire proceeding concludes within eight weeks of that appearance. No unnecessary adjournments are to be granted to the petitioner.
The Bench recorded that it had expressed no opinion either on the Superintendent's jurisdiction or on the merits, and that the authority is at liberty to take an independent decision on the issues the petitioner raises without being influenced by any observation made in the judgment, the facts having been discussed only to discern the violation of natural justice.
Order
The Order-in-Original dated 4 February 2026 was set aside for violation of the tenets of natural justice. The writ petition was disposed of with the above observations and directions, pending interlocutory applications were disposed of, and in the circumstances there was no order as to costs.