Madras High Court Reaffirms Importance of Natural Justice in GST Assessments

In a significant judgment that re-emphasizes the principles of natural justice, the Madras High Court has quashed a GST assessment order passed ex parte against M/s. G.P. Engineers, citing a violation of Section 75(4) of the Central Goods and Services Tax (CGST) Act, 2017. This case serves as a crucial reminder to both tax authorities and taxpayers about the legal requirement of providing a fair hearing before finalizing any adverse tax demand.

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Background of the Case

M/s. G.P. Engineers, the petitioner, approached the High Court to challenge an ex parte assessment order dated 24th February 2025 issued by the Deputy State Tax Officer-II, Nandanam Assessment Circle. The order, which demanded nearly ₹9.52 lakhs in tax liability, was passed without giving the petitioner a proper opportunity to be heard.

The tax department claimed that the notice was served via Registered Post Acknowledgment Due (RPAD), but the petitioner maintained that no effective notice or opportunity was ever received. The lack of communication left them unable to present their case or respond to the claims made in the notice.

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Violation of Section 75(4) of CGST Act

Section 75(4) of the CGST Act mandates that if any adverse order is to be passed against a taxpayer, a personal hearing must be granted. This requirement is not just procedural but a statutory safeguard that ensures the taxpayer can explain or contest the charges levied against them.

In this case, Justice Krishnan Ramasamy observed that the order was passed without providing any such opportunity, making it a clear breach of the mandatory legal procedure and a violation of the principles of natural justice.

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Recovery During Pending Litigation

Another disturbing aspect that came to light during the proceedings was that the tax department had already recovered ₹8.03 lakhs—almost 80% of the disputed tax amount—while the writ petition was still pending. This raised further concerns about procedural fairness and the rights of the taxpayer, especially when the legality of the order itself was under judicial scrutiny.

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High Court’s Observations

Justice Krishnan Ramasamy took a firm stand on the matter and stated that:

• The impugned order was unsustainable as it was passed without following due process.
• The principle of natural justice is the foundation of any fair legal system and must be upheld, especially in tax assessments that can significantly impact businesses.
• The department’s actions of initiating recovery without hearing the petitioner were premature and legally improper.

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Court’s Verdict and Directions

The Madras High Court set aside the impugned assessment order and remanded the matter back to the assessing officer for fresh adjudication. Key directions included:

• The petitioner must file a detailed reply with supporting documents within three weeks.
• The assessing officer must issue a fresh notice, providing at least 14 days’ time for a personal hearing before passing a new order.

These instructions aim to restore fairness and ensure the taxpayer gets an actual chance to present their defense, which was denied in the previous round of assessment.

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Why This Judgment Matters

This ruling sends a strong message to tax authorities across India that procedural lapses will not be tolerated, especially when they lead to adverse financial consequences for taxpayers.

It also reassures businesses and individual taxpayers that courts remain vigilant about protecting their fundamental rights under tax laws. Even if a tax demand appears justified, the process of assessment must be legally sound and fair.

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Key Takeaways

• Personal hearing is mandatory under Section 75(4) of the CGST Act.
• Tax authorities cannot bypass procedural safeguards even in cases of non-response.
• Courts can and will intervene if assessments are made in violation of the law.
• Taxpayers should always respond to GST notices timely and retain proof of communication.
• If any assessment seems unjust or was passed without hearing, legal remedies like writ petitions can offer relief.

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Conclusion

The Madras High Court’s judgment is a landmark in preserving the rights of taxpayers. It upholds the principle that tax administration must be conducted not just with authority, but with accountability and fairness.

Taxpayers and professionals must stay informed and vigilant, ensuring compliance with GST procedures, while also standing up for their rights when these procedures are violated.

Published on: 25 July 2025
Author: CS Chhavi Goyal