Tvl. Sri Mathuru Eswarar Traders Vs Deputy State Tax Officer - I (Madras High Court)

Madras High Court has underscored the necessity of effective service for Goods and Services Tax (GST) notices, ruling that tax authorities must resort to physical modes like Registered Post Acknowledgement Due (RPAD) if notices uploaded on the GST portal fail to elicit a response from taxpayers. The court’s directive came in the case of Tvl. Sri Mathuru Eswarar Traders vs Deputy State Tax Officer – I, where it set aside an assessment order passed without providing the petitioner an adequate opportunity to respond.The petitioner, Tvl. Sri Mathuru Eswarar Traders, a commission agency involved in cotton ginning, sought to quash an assessment order dated December 30, 2024, for the assessment year 2023-2024. The petitioner also sought a re-assessment with a personal hearing and the defreezing of its bank account.According to the petitioner, a show cause notice dated September 16, 2024, alleging the availment of input tax credit from a non-existent dealer and demanding Rs. 9,67,531.46 (including penalty and interest), was uploaded on the GST portal. The petitioner claimed unawareness of this upload, leading to no reply being filed. Subsequently, the first respondent issued the impugned assessment order, confirming the tax demand. The petitioner argued that the order was passed without proper service of the show cause notice, severely impacting their business due to the levy of interest and penalty and a subsequent bank attachment.During the proceedings, the petitioner’s counsel expressed willingness to deposit 25% of the disputed tax if the court set aside the order and remanded the matter for fresh consideration, requesting the bank attachment be lifted upon this payment. The learned Government Advocate for the first respondent acknowledged the petitioner’s offer and concurred with the possibility of remanding the case.Justice S. Srimathy, after reviewing the submissions and material, noted that the show cause notice was indeed uploaded on the GST portal. However, the court observed that the petitioner was not aware of this upload and did not receive a physical copy of the notice. The court found that passing an assessment order without affording a personal hearing and without ensuring the taxpayer’s awareness of the show cause notice was “illegal and unsustainable.”The court critically examined the practice of solely relying on portal uploads for notice service. It stated that even assuming portal uploads constitute sufficient service, when repeated reminders through the portal receive no response, the officer “ought to have applied his/her mind and explored diligently the possibility of sending notices by other modes prescribed in Section 169 of the GST Act.”The court emphasized that “mere uploading notice repeatedly without ensuring their receipt by the petitioner cannot be considered as effective service.” It described such compliance as “mechanical” and serving “no useful purpose,” leading only to “multiplicity of litigations.” The court concluded that in the absence of a response from the taxpayer to a portal-uploaded notice, the officer should have dispatched the notice through RPAD to ensure effective service.Judicial Precedent: While the judgment itself doesn’t explicitly cite specific judicial precedents, the court’s reasoning aligns with the broader principle of “audi alteram partem” (hear the other side), a fundamental tenet of natural justice. Indian courts have consistently held that a fair opportunity to be heard is crucial before adverse orders are passed, and effective communication of notices is a prerequisite for such an opportunity. The court’s emphasis on exploring alternative modes of service, especially when initial methods fail, reflects a judicial trend towards ensuring substantive justice over mere procedural compliance, particularly when a taxpayer’s fundamental right to defend themselves is at stake.Consequently, the Madras High Court set aside the assessment order dated December 30, 2024, and remanded the matter back to the first respondent for fresh consideration. The court issued the following directions:The writ petition was disposed of with these observations and directions, with no costs. The connected miscellaneous petitions were also closed. This ruling reiterates the High Court’s stance on ensuring due process and effective communication in tax administration, safeguarding taxpayer rights against mere technical compliance.