The Madhya Pradesh High Court has set aside a GST demand order passed by the Deputy Commissioner of State Tax, Bhopal, holding that a tax authority cannot dispose of a taxpayer’s detailed reply merely by recording that the response is “not satisfactory.”
The bench of Justice Vivek Rusia, Acting Chief Justice, and Justice Pradeep Mittal directed the assessing authority to reconsider the matter and pass a reasoned and speaking order after providing the taxpayer an opportunity of hearing.
The petitioner/assessee was served with a notice under Section 73 of the GST Act. In response, the petitioner submitted detailed replies, including the documents placed on record.
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Despite the detailed response, the Deputy Commissioner of State Tax proceeded to pass an order under Section 74 of the GST Act. The petitioner approached the High Court under Article 226 of the Constitution, challenging the validity of the order.
The High Court found that the manner in which the taxpayer’s reply had been dealt with was insufficient to sustain the order.
The Court noted that, so far as consideration of the taxpayer’s reply was concerned, the impugned order simply recorded that the reply was not satisfactory and consequently proceeded toward issuance of DRC-07 under Section 74.
According to the Bench, such an approach did not amount to proper consideration of the taxpayer’s defence. The Court specifically observed that there was “absolutely no consideration of the facts and grounds stated in the reply.”
The High Court emphasised the role of the assessing authority as a fact-finding officer. Such an authority, the Court held, is required to examine both the allegations contained in the show-cause notice and the defence submitted by the taxpayer.
The Court made it clear that an adjudication order must demonstrate an actual application of mind to the material placed before the authority. A conclusion unsupported by consideration of the taxpayer’s factual submissions cannot satisfy the requirement of a proper adjudication order.
Finding the order legally unsustainable, the Division Bench set aside the March 26, 2026 order passed by the Deputy Commissioner of State Tax, Bhopal.
Rather than terminating the proceedings outright, the Court remanded the matter to the assessing authority for fresh consideration. The authority has been directed to pass a reasoned and speaking order after granting the petitioner an opportunity of hearing.
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