Bombay High Court Sets Aside GST Demand Order Under Section 74(9): Breach of Natural Justice Due to Defective Notice Service and Denial of Hearing

Case Reference

Evergreen Recyclekaro (India) Limited Vs Principal Commissioner of State Tax (Bombay High Court)

The Bombay High Court recently exercised its extraordinary writ jurisdiction under Article 226 of the Constitution of India to intervene in GST adjudication proceedings, quashing both a Show Cause Notice and a demand order that were issued in flagrant disregard of the foundational principles of natural justice. The Court's intervention underscores a critical message: procedural propriety in GST enforcement is not a mere formality — it is a constitutional imperative.

Background and Nature of the Dispute

The assessee in the present matter is a private limited company incorporated under the Companies Act, 1956, engaged in the manufacture of cobalt sulphate, manganese sulphate, and nickel sulphate solutions. The relevant assessment period in question was Financial Year 2020-21.

The jurisdictional authorities commenced an investigation at the assessee's registered place of business on 10 April 2023, alleging violations under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Maharashtra Goods and Services Tax Act, 2017 (MGST Act).

Chronology of Proceedings

The sequence of events leading to the writ petition before the High Court can be outlined as follows:

  1. 10 April 2023 — Investigation initiated at the assessee's premises for alleged non-compliance under the CGST and MGST Acts, 2017.
  2. 6 March 2024 — An intimation was issued in Form GST DRC-01A (Part A) by the second Respondent.
  3. 18 May 2024 — The assessee filed its reply to the said intimation under Part B of Form GST DRC-01A.
  4. 18 October 2024 — A Show Cause Notice was issued in Form GST DRC-01 by the adjudicating authority.
  5. 20 December 2024 — An order was passed under Section 74(9) of the CGST and MGST Acts, 2017 in Form GST DRC-07, demanding tax, interest, and penalty.
  6. July 2025 — The assessee attempted to file a statutory first appeal under Section 107 of the CGST/MGST Acts on the GST portal, but the appeal was rejected as the prescribed limitation period had already elapsed.

Faced with the foreclosure of the statutory appellate remedy, the assessee had no option but to approach the Bombay High Court by way of a writ petition under Article 226 of the Constitution, challenging both the Show Cause Notice and the consequential demand order.

Preliminary Objection by the Respondents

Before the Court could examine the merits, the respondent authorities raised a preliminary objection to the maintainability of the writ petition. Their contention was straightforward: since the impugned demand order passed under Section 74(9) was subject to a statutory appellate remedy under Section 107 of the CGST/MGST Acts, the writ petition ought not to be entertained, and the assessee should have been directed to pursue the said appellate remedy.

The assessee's counsel, however, firmly opposed this objection. The submission advanced was that the present case was not a routine challenge to a tax demand but rather involved a brazen and demonstrable violation of natural justice at multiple stages — both in the matter of service of the Show Cause Notice and in the conduct of adjudication proceedings. It was argued that such violations rendered the writ petition entirely maintainable notwithstanding the existence of an alternate remedy.

Submissions of the Assessee

The assessee placed the following material contentions before the Court: