The Telangana High Court has dismissed a writ petition challenging a GST assessment order passed under Section 74 of the Central Goods and Services Tax (CGST) Act and the corresponding show cause notice, holding that the taxpayer must pursue the statutory appellate remedy.
The Bench of Chief Justice Aparesh Kumar Singh and Justice G.M. Mohiuddin has observed that the requirement under Section 74(2) to issue a show cause notice at least six months before the assessment order is not mandatory in nature where no prejudice has been demonstrated.
The petitioner challenged the assessment primarily on the ground that the show cause notice was issued less than six months before the assessment order, allegedly violating Section 74(2) of the GST Act. It also argued that the notice had been issued beyond the 30-day period contemplated by an earlier order of the High Court and that the adjudicating authority had denied it an effective opportunity of hearing.
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The company further contended that the assessment order suffered from multiple legal defects, including rejection of its limitation objection, violation of the principles of natural justice, confirmation of overlapping tax demands despite taxes already being paid, and failure to provide adequate opportunity to file a comprehensive reply. It also alleged non-compliance with Sections 75(4) and 75(5), which require grant of personal hearing and reasonable adjournments.
The State Tax Department argued that the controversy had already reached the Supreme Court in earlier proceedings concerning multiple assessment years. According to the department, the Supreme Court had specifically directed the petitioner to avail the statutory appellate remedy under Section 107 of the GST Act while permitting it to raise all factual and legal contentions, including grievances relating to missing departmental records.
The department submitted that several notices, reminders and opportunities of personal hearing had been provided during the adjudication process and that the High Court had already addressed the issue relating to missing files in earlier rounds of litigation.
The High Court traced the extensive procedural history of the dispute. Earlier, a coordinate Bench had set aside previous assessment orders and granted liberty to the department to issue fresh show cause notices after supplying relevant documents.
Subsequently, disputes arose regarding missing seized files. In separate writ proceedings, the department assured the Court that it would not rely upon the missing files during adjudication and would proceed only on the basis of available records after granting adequate opportunity to the taxpayer.
Thereafter, the matter reached the Supreme Court, which observed that the petitioner had reached a stage where the proper course was to file statutory appeals against the assessment orders. The Supreme Court also permitted the taxpayer to raise all grievances, including those concerning the missing files, before the appellate authority.
One of the principal issues before the High Court was whether issuance of the show cause notice less than six months before the assessment order rendered the proceedings invalid.
After examining Sections 74 and 75 of the GST Act, the Court held that the six-month requirement under Section 74(2) is not mandatory merely because the statute uses the word “shall.” The Bench observed that the provision does not prescribe any consequence for non-compliance and therefore cannot automatically invalidate the proceedings.
The Court emphasized that the real test is whether the taxpayer suffered any actual prejudice due to the shorter period between the notice and the assessment order.
The Bench found that the petitioner had received numerous opportunities to participate in the adjudication process. The record showed repeated notices, reminders, release of documents, clarification notices and multiple personal hearing opportunities extending over several months before the assessment order was passed.
The Court noted that even after earlier judicial proceedings, the petitioner was granted another personal hearing on March 23, 2026 before the assessment order was passed on March 28, 2026.
Importantly, the Court observed that the petitioner had not raised the objection regarding Section 74(2) during the earlier writ proceedings concerning the adjudication process.
Accordingly, the Bench concluded that no real prejudice had been caused by the timing of the show cause notice.
The High Court further held that the Supreme Court had already relegated the petitioner to the statutory appellate remedy under Section 107 of the GST Act. Although the Supreme Court subsequently clarified that the petitioner could avail “any other remedy in law,” that observation did not dilute its earlier direction that the assessment could appropriately be challenged through the statutory appellate mechanism.
The Court observed that all questions of law and fact, including issues relating to missing departmental files and merits of the assessment, could be urged before the appellate authority.
Holding that the petitioner had failed to establish any jurisdictional error or violation of natural justice warranting interference under Article 226 of the Constitution, the Telangana High Court dismissed the writ petition.
However, it granted liberty to the petitioner to pursue the statutory appellate remedy in accordance with the observations made by the Supreme Court.
The Telangana High Court held that the six-month requirement under Section 74(2) for issuing a show cause notice before the assessment order is not mandatory where no prejudice is demonstrated.
The Court reiterated that writ jurisdiction will ordinarily not be exercised when an effective statutory appellate remedy exists. Extensive opportunities of hearing and participation during adjudication may defeat allegations of violation of natural justice. Taxpayers challenging GST assessments must ordinarily pursue appeals under Section 107, particularly where the Supreme Court has already directed them to do so.
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