The Orissa High Court has set aside a GST adjudication order after finding that the tax authority ignored a physically submitted and acknowledged reply and passed the order before the deadline granted to the taxpayer for producing additional documents.
The Bench of Justice Sanjeeb K. Panigrahi and Justice Murahari Sri Raman has observed that a reply available on the adjudication record cannot be disregarded merely because it was not uploaded on the GST portal in Form GST DRC-06 and emphasised that procedural requirements cannot be used to deprive a taxpayer of the statutory right to defend against a demand.
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The petitioner, a registered works contractor based in Bhubaneswar, had undertaken improvement work on the right flood bank of the Kokolaba river, from Gayananda village to Baradanda, under the Bhanjanagar Irrigation Division. The project was undertaken with NABARD assistance under RIDF-XXII.
According to the petitioner, receipts from the work during the financial year 2019-20 amounted to ₹26,36,189 and were reflected in Form 26AS.
The contractor stated that the work had been tendered using the Schedule of Rates, 2014, which belonged to the earlier VAT regime. It claimed to have raised running account bills without charging GST under the bona fide belief that GST was not attracted to the irrigation work awarded on that basis.
The dispute began when the Superintendent issued an investigation notice dated June 30, 2025, alleging that the petitioner had received ₹73,58,507 for works contract services supplied to government organisations during 2019-20 without paying the appropriate GST.
The authority sought financial statements, income-tax records, GST returns, work orders, invoices, bank statements and reconciliation of the tax payable and paid. The petitioner sought additional time, citing a medical exigency affecting its authorised representative.
A demand-cum-show cause notice dated September 4, 2025, subsequently proposed recovery of ₹8,83,021 in GST, together with interest under Section 50(1).
The petitioner appeared for a personal hearing on January 27, 2026, and submitted a detailed written reply manually.
In that reply, the contractor disputed the receipts attributed to it and maintained that it had received ₹26,36,189 for the relevant contract work. It also argued that the transaction attracted GST at 5% under Notification No. 31/2017-Central Tax (Rate).
During the hearing, the Superintendent sought Form 26AS, running account bills and the final bill dated November 22, 2019. The petitioner was permitted to furnish those documents on February 13, 2026.
However, the authority passed the Order-in-Original on February 4, 2026. The order was served on February 12, a day before the date granted for submitting the additional documents.
The adjudication order proceeded on the basis that the taxpayer had neither appeared for the scheduled hearings nor filed a reply on the GST portal in Form DRC-06. This position conflicted with the acknowledged physical reply placed before the High Court.
The Court examined Section 74(9), which requires the proper officer to consider the representation made by the person chargeable with tax before determining the tax, interest and penalty.
Reading the provision alongside Rule 142(4), the Bench held that there was no restriction against considering a reply, explanation, written objection or representation merely because it had been submitted manually.
The Court found that the Superintendent had signed the petitioner’s reply as an acknowledgment of receipt. The authority was therefore demonstrably in possession of the defence before passing the adjudication order.
The Bench observed:
“If a reply filed manually is available on record, it is incumbent upon the Proper Officer to take cognizance of the same.”
It held that Form DRC-06 is a procedural tool intended to facilitate consideration of the taxpayer’s explanation. It cannot operate as an absolute barrier to the right to defend.
The officer could not adopt a hyper-technical approach and treat the matter as one in which no reply had been filed merely because the response was absent from the online portal.
The Court also found that the failure to consider the reply was compounded by the premature adjudication.
Despite granting time until February 13, 2026, for production of documents sought during the hearing, the Superintendent finalised the proceedings on February 4.
The Bench concluded that ignoring an officially acknowledged reply amounted to a patent violation of natural justice. Consequently, the adjudication order could not be sustained.
The department argued that adequate opportunities had been provided and that the petitioner should pursue the statutory appellate remedy, where both procedural objections and the merits could be examined.
The High Court nevertheless entertained the petition because the record disclosed a violation of natural justice.
Referring to Supreme Court decisions on alternative remedies, the Bench reiterated that the availability of a statutory appeal does not, by itself, remove the High Court’s power to intervene under Article 226 in an appropriate case.
The petitioner also questioned whether the conditions necessary to initiate proceedings under Section 74 were satisfied.
The Court discussed Supreme Court rulings requiring foundational facts to support allegations of fraud, wilful misstatement or suppression. It observed that the impugned order did not disclose a factual examination of the requirements for invoking Section 74.
However, the Bench did not finally decide the jurisdictional challenge or the limitation objection. It expressly left those issues open for the petitioner to raise before the authority.
The judgment also did not determine the applicable GST rate, the correct taxable receipts or the ultimate tax liability.
Setting aside the February 4, 2026 order, the High Court remitted the matter to the Superintendent for fresh consideration of the reply and the jurisdictional objections.
The petitioner was directed to appear before the authority within 15 days of receiving a certified copy of the judgment. It was permitted to raise all legally available objections and submit supporting documents and evidence.
The Superintendent must fix a hearing date and consider the material placed on record. The proceedings are to be concluded within eight weeks of the petitioner’s appearance, with cooperation from the taxpayer and without unnecessary adjournments.
The Court clarified that the authority must decide the jurisdictional questions and merits independently. The relief therefore requires fresh adjudication; it does not extinguish the proposed tax liability.
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