Reply to SCN Can’t Be Treated as “Empty Formality”: Orissa High Court Quashes GST Demand of Rs. 57.30 Lakh

The Orissa High Court has quashed a GST demand order and subsequent rectification proceedings against a taxpayer after finding that the adjudicating authority ignored the taxpayer’s reply to the show cause notice and failed to grant a personal hearing despite a specific request. The bench of Chief Justice Harish Tandon and Justice M.S. Raman observed that a reply to a show cause notice cannot be treated as an “empty formality or useless lumber” and stressed that authorities are duty-bound to apply their independent mind before passing adjudication orders. The writ petition was filed by Janardan Panda challenging an Order-in-Original dated December 26, 2025 passed under Section 73 of the Central Goods and Services Tax Act, 2017 and the Odisha GST Act, along with a rectification order dated January 6, 2026 passed under Section 161. Through these proceedings, tax, interest and penalty amounting to Rs. 57,30,708 had been raised for the tax period April 2021 to March 2022. The dispute originated from a show cause notice issued in Form GST DRC-01 dated August 18, 2025, wherein the department alleged non-payment of GST on royalty, District Mineral Foundation (DMF), Environment Management Fund (EMF), dead rent and surface rent under the reverse charge mechanism. The petitioner contended that no taxable event had occurred during the relevant period because mining operations had not commenced and therefore GST liability could not have arisen. The petitioner further argued that he had submitted a detailed reply to the show cause notice on September 17, 2025 and had expressly exercised his option for a personal hearing. However, despite this, the adjudicating authority recorded in the order that the taxpayer had neither replied to the show cause notice nor appeared for personal hearing. Counsel appearing for the petitioner also highlighted that the authorities later invoked Section 161 and suo motu passed a rectification order. However, even while rectifying the original order, no opportunity of hearing was granted to the petitioner. According to the petitioner, both actions constituted a clear breach of principles of natural justice. The department opposed the writ petition and defended the levy, arguing that GST on royalty under the reverse charge mechanism was legally payable. It further submitted that disputed factual issues were involved and the petitioner should be relegated to the appellate mechanism available under GST law instead of invoking writ jurisdiction. After examining the record, the High Court found that the petitioner had indeed marked the option seeking a personal hearing in his reply to the show cause notice. The Court noted that the adjudicating authority had adopted a manifestly erroneous approach by proceeding on the assumption that no reply had been filed and by failing to indicate that any hearing opportunity had actually been provided. The Bench further noted that while the rectification order acknowledged receipt of the reply, it still failed to establish that the petitioner had been given a personal hearing despite his explicit request. The Court found that this amounted to a flagrant violation of natural justice principles and reflected a mechanical exercise of adjudicatory powers under Section 73 of the GST Act. The Court held that replies filed by taxpayers cannot be brushed aside without assigning reasons. It observed that even where a taxpayer is absent, adjudicating authorities must independently examine and record reasons for accepting or rejecting explanations offered in the reply to the show cause notice. Failure to do so would render the order arbitrary. The High Court set aside both the original adjudication order dated December 26, 2025 and the rectification order dated January 6, 2026. The matter was remanded back to the adjudicating authority for fresh consideration on merits after granting a reasonable opportunity of hearing to the petitioner, while also permitting the petitioner to produce evidence supporting his case. Case Details Case Title: Janardan Panda Versus The Commissioner, Commercial Tax & GST, Odisha and others Citation: JURISHOUR-1274-HC-2026(ORI) Case No.: WP(C) No.11297 of 2026 Date: 14.05.2026 Counsel For Appellant: Sidharth Shankar Padhy, Advocate Counsel For Respondent: S. Das, Addl. Standing Counsel Click Here To Read Order Read More: Punjab & Haryana HC Quashes GST Cancellation Notice for Failure to Provide CBIC Enquiry Report

Reply to SCN Can’t Be Treated as “Empty Formality”: Orissa High Court Quashes GST Demand of Rs. 57.30 Lakh

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