CA's Failure to Forward GST Notices Cannot Be Grounds for Quashing Ex-Parte Demand Orders: Delhi High Court

Overview

The Delhi High Court, in the matter of M/s Fone Zone NXT v. Commissioner of DGST & Anr., delivered a significant ruling clarifying the limits of equitable jurisdiction in GST proceedings. The Court firmly held that where an assessee chooses to register under GST using a professional's email address, the resulting consequences of non-communication cannot be deflected onto the professional alone. Ex-parte demand orders passed under Section 73 of the Delhi Goods and Service Tax Act, 2017 cannot be set aside merely because the appointed Chartered Accountant did not forward notices — nor does an assessee's offer to partially deposit the outstanding demand create any entitlement to a fresh hearing outside the statutory framework.

Background and Factual Matrix

M/s Fone Zone NXT (hereinafter referred to as "the Petitioner") is engaged in the retail trade of mobile phones and related accessories. At the time of GST registration, the Petitioner furnished the email address of its Chartered Accountant on the GST portal as the primary contact for official correspondence.

Departmental Action

The Commissioner of DGST & Anr. (hereinafter referred to as "the Respondent") issued multiple show cause notices spanning several assessment years. These notices primarily pertained to:

  • Input Tax Credit (ITC) mismatches identified during scrutiny of returns
  • Retrospective cancellation of registrations of certain suppliers through whom the Petitioner had claimed ITC

Since the notices were routed to the Chartered Accountant's registered email address, and no replies were filed, nor did anyone appear for personal hearings, the Respondent proceeded to pass ex-parte demand orders under Section 73 of the Delhi Goods and Service Tax Act, 2017. Consequent to these orders, provisional attachment of the Petitioner's bank accounts was also initiated.

Petitioner's Position Before the High Court

Aggrieved by these developments, the Petitioner approached the Delhi High Court by way of writ petitions filed under Article 226 of the Constitution of India. The primary contentions advanced by the Petitioner were:

  1. The Chartered Accountant had failed to communicate the show cause notices to the Petitioner, thereby denying the Petitioner any opportunity to respond.
  2. The Petitioner should not be penalised for the lapses of a hired professional.
  3. The Petitioner expressed willingness to deposit 50% of the outstanding demand as a token of bona fides and sought fresh hearing on the remaining demand.
  4. Equitable jurisdiction of the High Court under Article 226 ought to be invoked to remedy the injustice caused by the professional's negligence.

Respondent's Stand

The department countered the Petitioner's claims on the following grounds:

  • All proceedings were conducted in strict accordance with the statutory provisions under the DGST Act.
  • The Petitioner was at all material times aware that the GST registration was linked to the Chartered Accountant's email address — this was a conscious choice made by the Petitioner at the time of registration.
  • The failure to respond to duly issued notices and the consequent ex-parte orders were a direct result of the Petitioner's own conduct and cannot be attributed to the department.
  • There was no procedural infirmity in the departmental action warranting interference by the High Court.