Tax and GST : Law and Legal Principles of Show Cause Notice and Further Proceedings under CGST Act, 2017

Tax and GST : Law and Legal Principles of Show Cause Notice and Further Proceedings under CGST Act, 2017

In a recent judgment related to GST, legal principles of show cause notice under CGST Act, 2017 was discussed.

In this case, in response to notice dated 11.08.2025, petitioner claims to have submitted detailed reply in Form GST-ASMT-11 along with all the relevant documents on 25.08.2025. Despite detailed reply, respondent No.2 issued show cause notice in terms of Section 73(1) of CGST Act, 2017 read with, UTGST Act. In show cause notice dated 26.09.2025, respondent No.2 had alleged that reply was not found satisfactory as relevant/supporting documents essential for verification of discrepancies were not uploaded.

Petitioner vide said show cause notice was directed to submit its reply within 30 days and to appear for personal hearing on 17.10.2025. However, petitioner sought extension of time for filing its reply and also sought adjournment of personal hearing vide its letters dated 13.10.2025 and 16.10.2025. Respondent No.2, however, issued reminder notice dated 27.10.2025 to submit its reply by 04.11.2025 and to attend personal hearing on 03.11.2025. However, as per petitioner it missed to reply to the said reminder notice and requested another opportunity for filing reply and for personal hearing. Subsequently, petitioner had duly filed reply to said show cause notice in Form GST-DRC-06 along with supporting documents on GST portal on 26.11.2025. It is the case of petitioner that despite detailed reply, respondent No.2 proceeded to pass the order confirming demand of Rs.13,42,051/- against the petitioner without considering submissions made therein.

HC noted that order dated 24.12.2025  goes to show that authorities have not taken into consideration reply dated 26.11.2025, though authorities in para No.5 had acknowledged reply by petitioner dated 26.11.2025, but had rejected the same only by asserting that same does not adequately address the issue raised in show cause notice. It was also claimed that tax payer had not furnished any documentary evidence on record or supporting material to substantiate submissions made in reply and had concluded that in absence of any satisfactory reply, the demand raised as per show cause notice has to be confirmed. 

Writ Jurisdiction in Tax Matters

Generally, Courts while exercising writ jurisdiction under Article 226 of Constitution of India do not interfere with orders which are appealable before appropriate authority. However, availability of alternative remedy does not operate as a complete bar to exercise writ jurisdiction under Article 226 of Constitution of India. There are exceptions to general rule of non-interference and Courts are bound to interfere if writ petition is filed for enforcement of any fundamental right or where there has been violation of principle of natural justice or where the order of proceedings are wholly without jurisdiction or vires of the Act are under challenge. In the event of any of these eventualities, exercise of writ jurisdiction by Court is fully justified and rather Courts are bound to act and ensure compliance of fundamental rights/principle of natural justice/jurisdiction vested in the authority.

Steps Before Passing Order Against Assessee

Perusal of the Tax Department's order goes to show that petitioner had duly submitted its reply along with relevant/requisite documents on GST portal on 26.11.2025. This fact stands acknowledged not only by acknowledgment slip annexed with the petition by the petitioner, but also by acknowledgment by authorities in para No.5 of the Tax Department's order. However, perusal of Tax Department's order goes to show that no reasons for not finding reply and documents annexed with reply uploaded on portal to be satisfactory have been given. The satisfaction recorded by authority that “taxpayer has not furnished any documentary evidence, records or supporting material to substantiate the statement made in the reply” has not been supported by any reasoning. No contention raised by petitioner or documents attached with reply dated 26.11.2025 has been noted, referred to or dealt with. The satisfaction so recorded by authorities below was required to be based upon reasoning which ought to have been reflected by way of impugned order. An order passed without any reasoning cannot be justified and can only be held to be a non-speaking order and violative of principles of natural justice. Authorities exercising quasi judicial or judicial powers are bound to consider reply so preferred by assessee and are bound to give reasons for not agreeing to the contentions raised in the reply. An order without reasoning cannot be sustained and amounts to violation of principles of natural justice.

Case : Hudson Insurance Brokers Pvt Ltd v. UT of Chandigarh [2026] GCtR 348 (P&H)