No Consideration Given to Reply to GST DRC-01: Madras HC Remands Case without Pre-deposit Mandate, Directs to Defreeze Bank Account [Read Order]

In a recent ruling, the Madras High Court set aside a GST ( Goods and Services Tax ) order and the consequential proceedings and remanded the case on the ground that the reply to the DRC-01 notice was not properly considered.

The Court also directed the Revenue Department to immediately defreeze the taxpayer’s bank account without any pre-deposit requirement, which is the important aspect of this case.

The petitioner, M/s. Sri Srinivasa Farm Service had approached the High Court challenging the impugned order dated 22.02.2025 and the consequential attachment order dated 22.05.2025, both issued by the GST Department.

As per the petitioner’s counsel, the Department had issued a notice in Form DRC-01 on 25.11.2024, to which the petitioner promptly filed detailed replies on 25.12.2024and 20.02.2025, enclosing all relevant supporting documents.

Despite these submissions, the Department proceeded to pass the impugned order without any discussion or finding on the reply submitted by the assessee. The petitioner’s rectification application challenging this was also rejected without granting a proper hearing.

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The counsel of the petitioner argued that the respondent Department had failed to apply its mind to the replies filed and had passed the final order mechanically, ignoring the material produced. Moreover, it was pointed out that no personal hearing was granted to the assessee before finalizing the assessment, which is a clear breach of the principles of natural justice.

It was also contended that due to the attachment order, the petitioner’s bank account had been frozen, severely affecting business operations, and sought urgent directions for its defreezing.

On the other hand, the Government Advocate appearing for the Department asserted that the authority had indeed considered the petitioner’s replies before passing the impugned order and requested the Court to sustain the assessment.

Justice Krishnan Ramasamy found that the Revenue failed to show that the petitioner’s detailed reply had been meaningfully considered. The Court noted that there was no finding or discussion regarding the reply submitted against the DRC-01 notice, nor was any personal hearing provided prior to finalization.

Accordingly, the bench sets aside the impugned order dated 22.02.2025 and the consequential order dated 22.05.2025 and permits the petitioner to file a fresh reply or objection with all supporting documents within two weeks.

The court directed the department to consider the fresh reply and pass a reasoned order strictly on merits, only after granting a personal hearing to the petitioner within eight weeks. It also directed to issue instructions to the petitioner’s banker to immediately lift the freeze on the bank account.

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