Bombay High Court Holds Orders Passed Without Proper Service of Show Cause Notice Violate Principles of Natural Justice

In a significant ruling, the Bombay High Court has reaffirmed the necessity of adhering to the principles of natural justice in tax proceedings, particularly the requirement of proper service of show cause notices before passing adverse orders against assessees.

The petitioner, a private limited company engaged in construction and logistics, challenged an order in original and a subsequent recovery notice issued by the GST authorities. The core grievance was that the show cause notice, which formed the basis of the impugned order, was never served at the petitioner’s current registered address or on its updated email IDs, despite these details being duly updated on the GST portal and communicated to the authorities. Instead, the notice was sent to the petitioner’s old address and email, resulting in the petitioner being unaware of the proceedings until the order and recovery notice were received.

During the hearing, the petitioner’s counsel argued that the entire proceedings were vitiated due to this lapse, as the petitioner was denied an opportunity to respond to the show cause notice or to be heard before the order was passed. The respondent authorities were unable to substantiate that the notice had been served at the correct address or email as per the GST records.

The Court, after considering the submissions and examining the record, found merit in the petitioner’s case. It held that the failure to serve the show cause notice at the correct registered address and email ID, as reflected in the GST certificate and portal, amounted to a gross violation of the principles of natural justice. The Court emphasized the settled legal position that no order imposing liability can be passed against an assessee without affording a reasonable opportunity of being heard.

Accordingly, the High Court quashed and set aside both the impugned order and the recovery notice. The Court directed the authorities to issue a fresh show cause notice to the petitioner at its current registered address and email ID, as per the GST records, within two weeks. The petitioner is to be granted a personal hearing, and a reasoned order is to be passed expeditiously, preferably within three months. All contentions of the parties were expressly kept open for the fresh proceedings.

This decision underscores the importance of strict compliance with procedural requirements in tax adjudication and reiterates that administrative convenience cannot override the fundamental right to a fair hearing.