Assessment was passed ex parte, entire disputed tax and penalty were already recovered from the Electronic Liability Ledger, and the Madras High Court remitted the matter back for fresh adjudication on merits after giving the Assessee an opportunity to reply.
ISSUE
Whether an ex parte assessment order passed pursuant to FORM GST DRC-01, without considering the Assessee’s reply, ought to be sustained when the disputed tax and penalty had already been recovered from the Assessee’s Electronic Liability Ledger.
RULE
An assessment affecting civil rights must comply with principles of natural justice. Where an order is passed ex parte and the Assessee is denied effective opportunity to place its defence and supporting documents, the matter can be remitted for fresh consideration on merits. Recovery of the disputed amount is also a relevant circumstance while balancing equities between the Assessee and the Department.
APPLICATION
In the present case, the Department had issued a Show Cause Notice in FORM GST DRC-01 dated 24.01.2023 for the tax period 2021-22. The assessment order dated 31.05.2023 came to be passed by confirming the proposal in the notice in the absence of any reply from the Assessee. The demand confirmed under the impugned order was tax of Rs. 9,43,952 and penalty of Rs. 9,43,952. It was also noticed that the entire disputed tax and penalty had already been recovered from the Assessee’s Electronic Liability Ledger on 04.03.2024. In these facts, the Court found it appropriate to restore the matter to the file of the adjudicating authority so that the Assessee could file its reply with requisite documents and the dispute could be decided on merits. The Court, however, protected the Department by permitting verification of actual recovery, and directed that if recovery had not in fact been made, the Assessee should deposit the entire disputed tax.
CONCLUSION
The Madras High Court held that since the impugned assessment order had been passed ex parte, the matter deserved to be remitted for fresh adjudication on merits, subject to the Assessee filing reply and documents within the time granted. The Court also directed that bank attachment, if any, would stand vacated upon compliance, subject to there being no other arrears for any other tax period.
Impact Analysis
This judgment reaffirms that even in GST matters, an ex parte order cannot be allowed to stand mechanically where the Assessee is willing to contest the case on merits. It also shows that where the disputed amount has already been recovered, the Court may lean in favour of restoring adjudication while adequately safeguarding the Department’s interest.
NNV Enterprises Vs. Deputy State Tax Officer-I – Madras High Court - W.P. No.7975 Of 2026 And W.M.P .No.8632 Of 2026 – Dated : 03-Mar-2026
Abhishek Raja "Ram"
@abhishekrajaram
MEC, STBA Delhi || Speaker and Author on GST. Life dedicated towards Tax and Economic Reforms & Simplification