Orissa High Court Nullifies GST Demand Due to Late Service of Hearing Notice

Background of the Dispute

In Kalinga Trader Vs Joint Commissioner, the Orissa High Court examined whether a substantial GST demand could stand when the assessee was not effectively notified of the hearing date. The controversy centred around an Order-in-Original dated 2 February 2026, issued by the Joint Commissioner, GST & Central Excise, Bhubaneswar Commissionerate, which:

  • Confirmed alleged excess availment and utilisation of inadmissible Input Tax Credit (ITC)
  • Raised demand for short paid or unpaid tax
  • Levied interest under Section 50(1) and Section 50(3) of the CGST/OGST Act, 2017
  • Imposed penalties under Section 74 and Section 122(3) of the same Act

The assessee approached the High Court under writ jurisdiction, challenging the order primarily on the ground of breach of principles of natural justice, specifically lack of proper opportunity of hearing.

Core Grievance: Violation of Natural Justice

The assessee’s case was that:

  • A notice fixing the date of personal hearing in the adjudication proceedings had not been received before the scheduled hearing.
  • Despite this, the adjudicating authority proceeded ex parte, assuming that the assessee had knowledge of the hearing date.
  • As a result, the order was passed without the assessee’s participation, allegedly depriving it of a fair chance to present its defence and supporting documents.

Thus, the challenge to the Order-in-Original was anchored squarely on procedural impropriety, not on the merits of the tax demand itself.

High Court’s Interim Direction to Verify Service of Notice

Earlier in the proceedings, the High Court had flagged this service issue and:

  • Called upon the departmental counsel to verify whether the hearing notice referred to in the Order-in-Original had actually been served upon the assessee prior to the hearing date.
  • Adjourned the matter to enable the department to obtain and place the relevant service and postal details before the Court.

This step underscored that the Court viewed proper service of notice as a threshold requirement for sustaining the adjudication.

Department’s Stand on Service of Hearing Notice

Upon instructions, the counsel representing the department submitted the following to the Court:

  • The notice fixing the hearing was indeed dispatched to the assessee.
  • However, postal records available with the department clearly indicated that the notice was delivered to the assessee only after the hearing date mentioned in that very notice.

In other words, there was no dispute that:

  • The notice was sent; but
  • Actual receipt by the assessee occurred after the scheduled hearing date, rendering the notice ineffective for the purpose of affording an opportunity of hearing.

Court’s Inference: No Effective Opportunity to Defend

Relying on the undisputed postal record, the Orissa High Court concluded that: