The Allahabad High Court, specifically the Lucknow Bench, has put a hold on a Goods and Services Tax (GST) demand made against a small business. They found that the tax authority had made its decision without giving the business a chance to explain its side in person, even though the business had already closed down and given up its GST registration.
A Division Bench, including Justice Sangeeta Chandra and Justice Amitabh Kumar Rai, has cited that the registration had been cancelled and the GST portal was no longer functioning via the firm. It is crucial to analyse why, even after knowing about the registration cancellation, the department does not attempt service of the SCN via alternative modes as mentioned u/s 169 of the GST Act.
As per the applicant, the business was closed by the firm dated 27 March 2024, as it faced losses and had duly surrendered its GST registration. On 18 April 2024, the department issued Form GST REG-19, citing 27 March 2024 as the effective date of cancellation of registration.
Even after the same, an SCN on 13 May 2024 was issued u/s 73 of the GST Act for the assessment year 2019-20, directing the petitioner to submit a reply by 13 June 2024. The applicant claimed that the notices do not cite the date, time, or venue for a personal hearing, which is crucial u/s 75(4) of the Act when an adverse order is contemplated.
Applicant, as the business was discontinued and the GST registration surrendered, the firm was no longer actively accessing the GST portal, and the applicant is not aware of the SCN. The department moved to pass an ex parte order assessing a tax liability of Rs 97,000, which consists of interest of Rs 80,412 and a penalty of Rs 20,000
The applicant, dissatisfied with the assessment, approached the HC claiming that the order was passed in breach of the norms of natural justice. It was claimed that Section 75(4) of the GST Act obligates allotting a chance of hearing where any adverse decision is given, whatever written request is made.
Also, the applicant said that once the department comes to know about the cancellation of the GST registration, it should adopt other modes of service as given u/s 169 of the Act, rather than only uploading notices on the GST portal.
The State authorities, countering the writ petition, claimed that the applicant had asked for a personal hearing and was duly allotted the same. As per the State, a notice on 3 July 2024 was uploaded on the departmental portal, allotting the applicant 1 week to appear before the commercial tax officer on any working day. The authorities adjudicate the case ex parte because the applicant did not submit a response, and also did not appear for the hearing.
The Court asked the State respondents to submit a counter-affidavit within 3 weeks, explaining the measures taken for service of notice after cancellation of GST registration. The Bench stayed the operation of the impugned assessment order till the next date of listing
The case has been listed for further hearing dated 7 January 2026. Till then, the raised demand against the applicant remains, giving interim relief to the closed firm pending adjudication on the problem of breach of natural justice.
| Case Title | M/S Kapoor Marketing Thru. Proprietor Pradip Gupta vs. State Of U.P. |
| Case No. | WRIT TAX No. – 1413 of 2025 |
| For Petitioner | Satish Kumar Pandey |
| For Respondent | C.S.C. |
| Allahabad High Court | Read Order |
