The Bombay High Court has quashed a GST demand and penalty order after finding that the tax authority denied the assessee a personal hearing and passed the adjudication order before the expiry of the statutory 60-day period available for voluntary payment under Section 74A(8) of the Central Goods and Services Tax Act, 2017.

The Bench of  Justice Anil L. Pansare and Justice Nivedita P. Mehta imposed litigation costs of ₹50,000 on the concerned tax officer, observing that the authorities were aware that the orders could not be sustained but failed to take corrective action even after receiving notice of the writ petition.

Buy Now: 150 + Judgments On GST – E-Compilation For August 2026

The petitioner had challenged an adjudication order dated January 5, 2026, passed under Section 74A(5) of the CGST Act, along with a rectification order issued on the same date.

The petitioner argued that the adjudicating authority passed the adverse order without providing the mandatory opportunity of a personal hearing contemplated under Section 75(4) of the CGST Act.

Section 75(4) provides that an opportunity of hearing must be granted where a written request is received from the person chargeable with tax or penalty. It also requires a hearing where the proper officer contemplates passing an adverse decision against that person.

The petitioner submitted that its case was covered by the latter part of the provision because the order imposed a penalty and other financial liabilities. Consequently, the authority was required to grant a hearing even independently of any specific written request.

The State opposed the petition by contending that an opportunity of hearing had already been given to the assessee.

However, the petitioner clarified that the hearing referred to by the department was held on October 16, 2025, in connection with a different matter involving, among other things, an input tax credit mismatch. The notice forming the basis of the disputed order was issued later, on November 11, 2025.

According to the petitioner, a hearing granted before the issuance of the relevant show cause notice could not be treated as compliance with Section 75(4). A meaningful opportunity to defend the case had to be provided after the allegations and proposed liabilities were communicated through the notice.

The High Court accepted this contention. It recorded that, admittedly, no opportunity of hearing was given after the issuance of the notice dated November 11, 2025.

Significantly, the notice itself stated that a personal hearing was “not applicable.” In view of this express statement and the absence of any subsequent hearing, the Court held that the adjudication order was unsustainable.

“The notice issued itself indicates that the personal hearing is not applicable. That being so, the impugned order is unsustainable having been passed without giving opportunity of hearing to the petitioner,” the Bench observed.

The petitioner also challenged the timing of the adjudication order by relying on Section 74A(8)(ii) of the CGST Act.

The provision permits a person served with a show cause notice to pay the tax demanded, along with interest payable under Section 50, within 60 days from the issuance of the notice. If the payment is made within this period, no penalty is payable and the proceedings relating to the notice are deemed to be concluded.

In the present case, the show cause notice demanding tax, interest and penalty was issued on November 11, 2025. Accordingly, the 60-day period available to the petitioner continued until January 10, 2026.

The adjudicating authority, however, passed the order on January 5, 2026—five days before the statutory window expired.

During the hearing, the Assistant Government Pleader, acting on instructions from the Deputy Commissioner of State Tax, Nagpur, acknowledged that the order had indeed been passed within the 60-day period.

The High Court consequently held that the adjudication order was passed in breach of Section 74A(8)(ii), as it deprived the petitioner of the complete statutory period available to pay the tax and interest without incurring a penalty.

The State argued that the petitioner should be relegated to the statutory appellate remedy available under Section 107 of the CGST Act.

Reliance was placed on the Bombay High Court’s earlier decision in Mahapuja Ltd. Through its Director Keyur Jaswant Shah v. Office of Commissioner of GST, decided on August 5, 2026.

The Bench, however, found that the facts of the cited case were entirely different and refused to reject the writ petition on the ground of availability of an alternative remedy.

The Court reiterated that the existence of a statutory appeal does not prevent the High Court from exercising its jurisdiction under Article 226 of the Constitution where an order is passed in violation of natural justice, in breach of statutory provisions or suffers from an apparent error.

In the present case, both exceptional circumstances were established: the petitioner was denied a personal hearing, and the order was passed contrary to the 60-day protection granted under Section 74A(8)(ii).

The High Court took a serious view of the department’s failure to correct the orders despite the violations being apparent.

The Bench observed that the respondents were aware that the adjudication order was unsustainable. After receiving notice of the writ petition, they should have taken corrective steps instead of requiring the petitioner to continue with litigation.

Due to this failure, the Court directed the adjudicating authority to pay ₹50,000 as litigation costs to the petitioner within two weeks.

The Court further permitted the State authorities to recover the amount from the officer responsible for passing the disputed orders.

Accordingly, the High Court allowed the writ petition and quashed both the adjudication order and the rectification order dated January 5, 2026.

The decision underscores that a personal hearing under Section 75(4) is mandatory whenever an adverse GST decision is contemplated. It also makes clear that an adjudicating authority cannot prematurely pass an order during the statutory 60-day period available under Section 74A(8) for payment of tax and interest without penalty.

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: JURISHOUR | TAX LAW DAILY BULLETIN : 4 SEPTEMBER, 2026