Mvs Veera Traders vs. The Deputy State Tax Officer

Held

The Court quashed the impugned order dated 20.02.2025 and the consequential attachment order dated 14.07.2026. The Court reasoned that the petitioner's inability to file a reply to the Show Cause Notice was due to his incarceration under the NDPS Act, which prevented him from participating in the proceedings. This failure to provide an opportunity to be heard violated the principles of natural justice. The Court accepted the petitioner's undertaking to deposit 25% of the disputed tax as a condition for de novo adjudication. The case was remitted back to the respondent for a fresh assessment, subject to the petitioner depositing 25% of the disputed tax in cash within thirty days and filing a reply to the Show Cause Notice along with supporting documents. The respondent was directed to pass a final order on merits within three months of the reply and pre-deposit. If the petitioner failed to comply with these stipulations, the respondent was at liberty to proceed with recovery as if the writ petition was dismissed.

Facts

The petitioner, MVS Veera Traders, represented by Mr. Veerendran, filed a writ petition challenging an order passed under Section 73 of the CGST/SGST Act, 2017 (DRC-07 dated 20.02.2025) and a consequential attachment order dated 14.07.2026. The impugned order confirmed a proposal in a Show Cause Notice (DRC-01 dated 26.11.2024) in the absence of a reply. The petitioner contended that he was unable to respond to the notice as he was incarcerated in connection with a crime registered under the NDPS Act. He was convicted on 30.03.2025 but later acquitted by the High Court on 16.01.2026. The writ petition was filed on 12.08.2026, after the limitation period for filing an appeal under Section 107 had expired.

Key Issues

1. Whether the impugned order and consequential attachment order are liable to be quashed on the grounds that the petitioner was unable to file a reply to the Show Cause Notice due to his incarceration under the NDPS Act, thereby violating principles of natural justice? Petitioner's Contention: The petitioner argued that his inability to respond to the Show Cause Notice was due to his detention and subsequent conviction under the NDPS Act. He asserted that this prevented him from participating in the assessment proceedings, leading to an ex-parte order. To demonstrate bona fides and seek a fresh adjudication, the petitioner offered to deposit 25% of the disputed tax demand. Respondent's Contention: The respondent, represented by the learned Government Advocate (Taxes), did not record any specific arguments against the petitioner's plea for a fresh opportunity, but rather took notice of the petition.