Personal Hearing Mandatory Before Adverse GST Order: Analysis of Shreenath Logistics Vs State of Madhya Pradesh

Background and Procedural History

The Madhya Pradesh High Court in Shreenath Logistics Vs State of Madhya Pradesh And Others examined the legality of a GST adjudication order dated 25.03.2026, passed against the assessee pursuant to a composite show cause notice dated 16.05.2024.

The writ petition was filed under Article 226 of the Constitution of India, wherein the assessee prayed for:

  1. Quashing of the order dated 25.03.2026 on the grounds that:

    • It was passed without assigning proper reasons,
    • No effective opportunity of hearing was given, and
    • It violated the principles of natural justice and was allegedly without authority of law.

  2. Quashing of the show cause notice issued in Form DRC-01 on 16.05.2024, which covered multiple financial years from 2017-18 to 2022-23, alleging that such a composite/block notice is impermissible under the GST framework.

The core complaint was that the adjudicating authority proceeded to confirm substantial tax, interest, and penalty liabilities without granting a personal hearing, despite a specific written request made by the assessee and despite the clear mandate of Section 75(4) of the GST Act.

Facts in Brief

Issuance of Composite Show Cause Notice

  • Respondent No.3 issued a composite show cause notice in Form DRC-01 dated 16.05.2024.
  • The notice related to financial years 2017-18 to 2022-23, alleging various discrepancies in the GST returns filed by the assessee.

Reply by the Assessee

  • The assessee submitted a detailed written reply on 05.10.2024.
  • In this reply:
    • The assessee addressed the factual and legal objections.
    • Clarifications were furnished on the alleged discrepancies.
    • A specific written request was made for a personal hearing before finalization of the proceedings.

Adjudication Order After Long Delay

  • Around 17–18 months after the reply, respondent No.4 (who, according to the assessee, was not the competent/jurisdictional officer) passed the order dated 25.03.2026.
  • Form DRC-07 was issued, creating the following liabilities:
    • Tax: Rs. 2,58,72,212
    • Interest: Rs. 1,66,59,753
    • Penalty: Rs. 3,75,000
    • Total: Rs. 4,29,06,965

The assessee asserted that:

  • The reply dated 05.10.2024 had not been duly considered.
  • No personal hearing was granted despite a categorical request.
  • The proceeding was concluded by an officer lacking jurisdiction.
  • The composite show cause notice for multiple years was itself contrary to law.

These aspects were brought before the High Court in the writ petition.

Submissions on Behalf of the Assessee

The learned counsel for the assessee advanced the following primary arguments:

  1. Violation of Section 75(4) of the GST Act

    • The reply explicitly requested a personal hearing.
    • Despite this, the impugned order was passed without granting any oral hearing, in direct conflict with Section 75(4) which mandates an opportunity of hearing in specified circumstances.

  2. Excessive Delay in Passing Final Order

    • Nearly 18 months elapsed between submission of reply and passing of the final order.
    • Such an inordinate delay, without proper justification, compounded the arbitrariness and unfairness of the process.