Ex-Parte GST Order Set Aside by Uttarakhand High Court — Portal-Based Notice Held Insufficient After Business Closure

Case Overview

A.S. Traders Vs State of Uttarakhand and Others (Uttarakhand High Court)

The Uttarakhand High Court recently delivered a significant ruling in favour of an assessee whose GST registration had been cancelled following closure of business operations. The Court set aside an ex-parte assessment order along with consequential recovery proceedings, holding that serving a notice exclusively through the GST portal — particularly when the assessee's registration stood cancelled — did not amount to valid service under the law. The decision reinforces the principle that procedural fairness and effective communication of notices are non-negotiable requirements in GST adjudication.

Background and Facts of the Case

The assessee, A.S. Traders, was a sole proprietorship engaged in trading of iron scrap. During the Covid-19 pandemic, business operations came to a complete halt, following which the assessee filed an application for surrender of GST registration on 14.08.2020.

A field survey was subsequently carried out by the Assessing Officer, and the registration was officially cancelled with effect from 31.03.2023, as intimated vide communication dated 09.05.2023.

Despite the assessee having already applied for cancellation of registration owing to cessation of business, the department issued a show cause notice dated 14.12.2022, alleging non-payment of tax for the financial year 2020–21. Critically, this notice was served solely by uploading it on the GST portal — no other mode of communication was adopted.

Since the assessee had shut down operations and had already applied for deregistration, he had no reason to monitor the GST portal. As a result, he remained completely unaware of the proceedings. The department proceeded ex-parte and passed an assessment order dated 03.02.2024 under Section 74(9) of the UKGST Act, imposing a substantial tax demand, followed by initiation of recovery proceedings through a recovery certificate of the same date.

Prayers Sought Before the High Court

The assessee approached the Uttarakhand High Court by way of a writ petition, seeking the following reliefs:

"(a) issue a writ, order or direction, in the nature of certiorari, quashing the Ex-parte Assessment Show cause notice (including Form – DRC-01A (u/s 74(5) of the UKGST Act, 2017) (Annexure no. 4(colly)), r/w Ex-parte Assessment order u/s 74(9) dated 03.02.2024 passed by respondent no. 3 for the Assessment year 2020-21, imposing heavy ex-parte demands (Annexure no. 5 (colly)); and the consequent Recovery proceedings being initiated by respondent no. 4 consequent to the Citation of Recovery certificate dated 03.02.2024 for AY 2020-21, issued by respondent no. 3 (Annexure No. 6);

(b) issue a writ, order or direction in the nature of mandamus, remanding the Assessment proceedings back to respondent no. 3 namely the Deputy Commissioner (Assessment), Sector-8, Dehradun for denova assessment proceedings for the Assessment Year 2020-21, for passing Assessment order, after proper opportunity of hearing, as contemplated u/s 75(4) & (5) of the UKGST Act, 2017;"

The case essentially turned on two crucial legal questions:

  1. Whether service of notice exclusively through the GST portal, in circumstances where the assessee's GST registration had been cancelled, constitutes valid service under Section 169 of the CGST Act.

  2. Whether the impugned assessment order violated the statutory mandate under Section 75(4) of the GST law, which requires granting an opportunity of personal hearing before passing any adverse order.

Service of Notice Under Section 169 of the CGST Act