The Bombay High Court has quashed a GST recovery notice demanding ₹16.25 lakh from a taxpayer’s bank, along with the underlying show cause notice, assessment order and appellate order, after finding that the taxpayer had not been heard and the proceedings violated the principles of natural justice.
The bench of Justice M. S. Karnik and Justice Sandesh D. Patil relied on Star Engineers (I) Pvt. Ltd. v. Union of India and Others, 2023 SCC OnLine Bom 2682 and observed that the Court had allowed even a time-barred correction in GSTR-1 where the error was bona fide and there was no loss to the Revenue.
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The dispute arose from an inadvertent error in reporting input tax credit (ITC) under CGST and SGST instead of IGST. The taxpayer subsequently corrected the reporting in its GSTR-3B return.
The petitioner received an invoice from M/s Jet Set Go Aviation Services Ltd. in March 2019 for ₹53,17,814, with IGST of ₹8,11,912.
According to the judgment, the petitioner’s accountant incorrectly and inadvertently recorded the ITC in the March 2019 GSTR-3B return under CGST and SGST, showing ₹4,05,596 under each head, instead of reporting it under IGST.
The petitioner corrected the error in September 2019 by showing the ITC under IGST in its GSTR-3B return for that month. The Court noted that the document reflecting this correction had been placed on record.
The State Tax Officer issued a show cause notice. The petitioner maintained that it was uploaded only on the GST portal and was not communicated through another effective mode.
An ex parte Order-in-Original followed on July 29, 2024. This order was also uploaded on the portal, and the petitioner asserted that it had not been effectively served.
The judgment records the petitioner’s account that it learned about the proceedings when the nodal officer contacted it by telephone in connection with an amnesty scheme. The petitioner argued that it had been deprived of an opportunity to respond to the notice or explain the reporting error before adjudication.
Its statutory appeal was rejected on December 29, 2025, on the ground of limitation.
On February 11, 2026, the State Tax Officer issued a notice under Section 79(1)(c) of the GST Act, directing Bank of Baroda to pay ₹16,25,258 to the Government on the petitioner’s behalf. The petitioner challenged this recovery action together with the preceding proceedings.
The petitioner submitted that merely uploading the show cause notice and assessment order on the portal had not resulted in effective communication in the circumstances of its case.
It argued that the proceedings had been conducted without informing it or providing an opportunity to be heard. It also questioned the direction issued to its bank, contending that recovery had been initiated without notice to it.
On the underlying ITC dispute, the petitioner maintained that the reporting mistake was bona fide and that there had been no loss of revenue to the State.
The Revenue defended the impugned orders and submitted that they required no interference.
After examining the record, the High Court found that the petitioner had not been heard at the relevant stage. It held that the show cause notice, Order-in-Original and Order-in-Appeal were in gross defiance of the principles of natural justice.
The Bench relied on T.S. Lines India Pvt. Ltd. v. State of Maharashtra, 2024 SCC OnLine Bom 6175. The passage reproduced in the judgment addressed a taxpayer’s failure to notice documents on the portal, the requirement to place notices and orders in the “View Notices and Orders” window, and the absence of an opportunity to reply.
The Court also referred to Abracadabra India and Others v. Union of India and Others, decided on October 16, 2026, as taking the same view.
The Bench further referred to the Madras High Court’s decision in Axiom Gen Nxt India Private Limited v. Commercial State Tax Officer, T. Nagar Assessment Circle, Chennai, 2025 SCC OnLine Mad 3898.
It noted that the Madras High Court had drawn a distinction between sufficient and effective service under Section 169 of the GST Act. As described in the Bombay High Court judgment, where portal-based service is ineffective, the Department must adopt alternative statutory modes, such as registered post with acknowledgment due. Failure to do so renders the proceedings unsustainable.
The ruling turns on ineffective communication and the resulting denial of an opportunity to respond in the circumstances before the Court. It does not establish that every notice uploaded on the GST portal is invalid.
The High Court expressly noted that the petitioner had corrected the accountant’s mistake by reporting the ITC under IGST in the September 2019 GSTR-3B return.
That precedent supported the Court’s consideration of the reporting mistake, although the present dispute concerned GSTR-3B.
The High Court quashed the recovery notice dated February 11, 2026, the show cause notice dated May 27, 2024, the Order-in-Original dated July 29, 2024, and the Order-in-Appeal dated December 29, 2025.
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