Natural Justice Breach and Procedural Delay Renders GST Assessment Invalid: Madras High Court Directs De-Freezing of Bank Accounts [Read Order]
The Court relied upon the digital communication records available on the GST portal which proved that the petitioner had not been duly served through physical means as mandated by law.
![Natural Justice Breach and Procedural Delay Renders GST Assessment Invalid: Madras High Court Directs De-Freezing of Bank Accounts [Read Order]](https://images.taxscan.in/h-upload/2025/10/19/2098018-natural-justice-breach-and-procedural-delay-renders-gst-assessment-invalid-madras-high-court-directs-de-freezing-of-bank-accounts-txn.webp "Natural Justice Breach and Procedural Delay Renders GST Assessment Invalid: Madras High Court Directs De-Freezing of Bank Accounts [Read Order]")
The Bench of the Madras High Court ruled that breach of principles of natural justice and undue procedural delay in completing assessment proceedings under the Central Goods and Services Tax Act, 2017, rendered the assessment order invalid. The Court, while setting aside the order passed under Section 73 of the Act, also directs the de-freezing of the petitioner’s bank accounts upon partial payment of the disputed tax.
The petitioner, M/s. VMC Polychem LLP, represented by its partner Pritesh Rohit Mehta, challenged the assessment order dated January 29, 2025, passed by the Commercial Tax Officer, Chennai, under Section 73 of the Central Goods and Services Tax Act, 2017. The impugned order pertained to the Financial Year 2021-2022 and was accompanied by a bank attachment over two of the petitioner’s accounts with IndusInd Bank, Chennai.
The proceedings began with a notice in Form GST DRC-01A dated October 28, 2022, followed by two show cause notices dated August 26, 2023, and September 13, 2023. While the latter was dropped as being duplicate, the former remained active. The petitioner submitted replies with supporting documents on September 8 and October 10, 2023, but claimed that no personal hearing was subsequently afforded.
Believing the proceedings to have been dropped after 1.5 years of inaction, the petitioner was surprised to learn that a final assessment order had been passed in January 2025, leading to the freezing of its bank accounts.
Represented by R. Sandeep Bagmar, the petitioner contended that the assessment order was vitiated by a violation of the principles of natural justice since no opportunity for personal hearing was granted before finalization. He further argued that passing the order after a delay was arbitrary and contrary to the scheme of Section 73 of the Central Goods and Services Tax Act, 2017.
Represented by K. Vasanthamala, the Commercial Tax Department submitted that the petitioner had been afforded sufficient opportunity, including notices dated July 17, August 16, and October 25, 2024, calling for personal hearing and response. It was contended that the petitioner failed to avail these opportunities and could not now claim denial of natural justice. Further, it was submitted that a personal hearing was indeed fixed on November 4, 2024, which the petitioner attended.
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The Bench of Justice Krishnan Ramasamy observed that the notices were served only through the GST portal and not via physical mode as required under Section 169 of the Central Goods and Services Tax Act, 2017. Therefore, the Court held that the petitioner’s non-response was justified, as the notices were uploaded long after prior communications and remained unnoticed.
The Court ruled that principles of natural justice were violated, and the prolonged delay between the show cause notice and assessment order further rendered the proceedings untenable. The Court clarified that even though Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017, does not explicitly prescribe a time limit, however assessment should ordinarily be completed within three months from the issuance of a show cause notice.
Accordingly, the Court set aside the impugned order dated January 29, 2025, and remitted the matter for fresh consideration.
Simultaneously, directing the petitioner to deposit 10% of the disputed tax within four weeks. Upon such payment, the third respondent was instructed to issue directions to IndusInd Bank for de-freezing the petitioner’s bank accounts, allowing normal operation.
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