GST Orders without ‘Application of Mind’ Violates Article 14: Allahabad HC Sets Aside Ex-Parte Order, Directs to Deposit Rs. 2L [Read Order]

The Allahabad High Court has set aside an ex-parte GST ( Goods and Services Tax ) demand order, holding that orders passed without proper application of mind and without granting an effective opportunity of hearing violate Article 14 of the Constitution of India.

The Court observed that reasoned decision-making is an essential requirement of quasi-judicial proceedings under the GST Act, 2017.

The writ petition was filed by M/s Mishra Agencies, which challenged a recovery order passed under Section 73 of the GST Act, 2017, along with an appellate order dismissing the appeal on the ground of limitation.

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The petitioner contended that the original adjudication order was passed without granting any personal hearing and without considering the taxpayer’s reply, rendering it patently ex-parte.

While the State argued that an opportunity had been granted but not availed, the Court found from the record that the impugned order did not disclose any application of mind. The Court noted that the order neither dealt with the petitioner’s explanation nor recorded reasons justifying the demand, thereby failing the basic test of fairness in administrative action.

The High Court noted the earlier judgments including M/s Chandra Sain v. Union of India and Om Prakash Mishra v. State of U.P., to reiterate that reasons are the “heart and soul” of any administrative or quasi-judicial order. It held that an order affecting a taxpayer’s right to carry on business under Article 19(1)(g) cannot be sustained if it is non-speaking or mechanically passed.

Additionally, the Court clarified that even though the appellate authority may lack the power to condone delay under Section 107 of the GST Act, this does not cure the illegality of an original order that is ex-parte and devoid of reasoning. Since the appeal was dismissed only on limitation and not on merits, the doctrine of merger would not apply, allowing the High Court to examine the validity of the original order.

The bench of Justice Jaspreet Singh observed that “In view of the order being without any application of mind, the same does not satisfy the test of Article 14 of the Constitution of India, as such, the impugned order dated 25.04.2024 is set aside.”

Therefore, the Allahabad High Court quashed both the original GST demand order dated 25 April 2024 and the appellate order dated 18 February 2025. However, the Court balanced equities by directing the petitioner to deposit ₹2 lakh and file a reply to the show cause notice within three weeks, after which the adjudicating authority must pass a fresh, reasoned order after granting a proper hearing.

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