Flagrant Breach of Principles of Natural Justice: Gujarat HC quashes GST e-Invoice SCN and Penalty issued on Same Day

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GST UPDATEZ ON 29-07-2025 by R.SRIVATSAN, IRS, NACIN, CHENNAI

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The honourable Gujarat High Court quashed both a GST e-Invoice show cause notice (SCN) and a penalty order issued to a taxpayer (Kapton Alloys Private Limited Vs State of Gujarat & Anr. dt: July 2025) on the same day, holding that it amounted to a flagrant breach of the principles of natural justice. It appears that the GST authorities issued a show cause notice (SCN) and without waiting for a reply or hearing from the assessee, passed a penalty order on the very same day. The taxpayer argued that this denied any real opportunity to submit a defense, reply, or seek a hearing—an essential requirement of law for procedural fairness.

In this context the Gujarat High Court passed an order emphasizing that natural justice requires not just formal notice, but a meaningful opportunity to be heard before any adverse decision, especially a penalty, is imposed. The Court found that issuing the SCN and penalty simultaneously was a procedural abuse and “flagrant breach of principles of natural justice”. As a result, both the SCN and the penalty order were quashed.

The decision reiterates the basic procedural safeguards under GST too that the authorities must provide adequate time and genuine opportunity for the taxpayer to respond before passing a penalty order. Any tax/penalty order passed without adhering to natural justice can be legally challenged and quashed, as held in previous cases like Devang Paper Mills Pvt Ltd vs State of Gujarat (2022).

This judgment serves as a binding precedent for GST authorities in Gujarat and as persuasive authority for other states or similar circumstances. It is a reminder that administrative expediency cannot override fairness or due process, and any person can legitimately challenge ex-parte penalty orders.

Well……

In summary, the Gujarat HC’s ruling is a strong reaffirmation that natural justice is non-negotiable in GST adjudication, and any order violating these principles will not withstand or pass the test of judicial scrutiny.

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