Bombay HC Quashes ₹16.25 Lakh GST Recovery After Portal-Only Notices Left Firm Unheard

In March 2019, the petitioner mistakenly reported input tax credit (ITC) of ₹8,11,912 on an invoice under CGST and SGST instead of IGST, then reported the ITC under IGST in its September 2019 GSTR-3B

The tax officer issued a show-cause notice on 27 May 2024 and passed an ex parte order-in-original on 29 July 2024; both were uploaded to the GST portal, and the petitioner said it did not receive effective notice of the proceedings

After learning of the proceedings in February–March 2025, the petitioner appealed, but the appeal was rejected as time-barred on 29 December 2025

The officer subsequently issued a notice to the petitioner’s bank under Section 79(1)(c) of the GST Act to recover ₹16,25,258

The petitioner challenged the show-cause notice, the orders and the recovery notice, alleging denial of natural justice and relying on its correction of the ITC error

Section 79(1)(c) of the GST Act provides for recovery by requiring a third party, including a bank, to pay money due to a taxable person towards tax arrears

Section 169 of the GST Act governs service of notices and decisions; drawing on Axiom Gen Nxt India Private Limited v. Commercial State Tax Officer, the Court noted that sufficient service is distinct from effective service and that, where portal-based service is ineffective, the Department must adopt an alternate statutory mode such as RPAD

The principles of natural justice require a meaningful opportunity to respond before an adverse order is made

The Court relied on T.S. Lines India Pvt. Ltd. v. State of Maharashtra for the view that failure to notice a portal-posted notice or order, where the taxpayer was not heard, could not be attributed to the taxpayer, and referred to Abracadabra India on the same issue

It also cited Star Engineers (I) Pvt. Ltd. v. Union of India concerning allowance of a time-barred return correction where the mistake was bona fide and there was no revenue loss

The Court found that the petitioner had not been heard before the show-cause notice and order-in-original proceedings concluded, and held that portal-only communication had not provided effective notice in the circumstances

Applying the natural-justice principles and the authorities on portal-based service, it treated the show-cause notice, the order-in-original and the appellate order as unsustainable

The Court also took account of the petitioner’s evidence that it had corrected the bona fide ITC classification error by reporting the credit under IGST in September 2019, and referred to Star Engineers regarding bona fide corrections without revenue loss

It made the rule absolute and disposed of the petition