Orissa High Court Sets Aside Ex Parte Refund Rejection Owing to Proprietor’s Cancer Treatment: Upholding Principles of Natural Justice

Introduction

In tax adjudication, adherence to timelines and procedural requirements is crucial. However, when genuine circumstances such as serious illness prevent compliance, courts have consistently emphasized the importance of natural justice over rigid procedural formalities. The Orissa High Court, in its judgment dated 12 August 2025 in M/s Neelam Rubbers v. Chief Commissioner of CT & GST, Odisha, dealt with such a situation. The petitioner, a proprietor suffering from cancer, could not respond to a show cause notice (SCN) within the prescribed period. The refund application was rejected ex parte. The High Court intervened, setting aside the rejection order and remanding the matter for fresh adjudication. This case highlights the judicial approach of balancing statutory compliance with fairness, ensuring that genuine hardships are not overlooked in tax proceedings.

Case Summary

• Parties Involved:
  • Petitioner: M/s Neelam Rubbers (supplier to a Special Economic Zone)
  • Respondent: Chief Commissioner of CT & GST, Odisha
• Facts:
  • The petitioner filed GST refund claims for the period April 2018 to March 2019, invoking Sections 16 and 54 of the GST Act.
  • A show cause notice (SCN) was issued on 23 February 2023, requiring a reply by 26 February 2023.
  • The petitioner, however, was undergoing cancer treatment (carcinoma) from 17 February to 10 May 2023. Consequently, they failed to respond, and the refund was rejected ex parte on 25 February 2023.
• Legal Issue:
  • Can an ex parte rejection of a refund application be upheld if the taxpayer was physically incapacitated due to serious illness and thus unable to respond to the SCN in time?
• Judgment:
  • The Court acknowledged the medical records substantiating the petitioner’s inability to respond due to the cancer treatment.
  • It held that denying the petitioner the opportunity to present its case was prejudicial. On that basis, the Court set aside the ex parte rejection order (dated 25 February 2023).
  • The matter was remanded to the authority, with directions for the petitioner to appear by 26 August 2025 and resubmit documentation. The authority was directed to complete verification and pass a fresh order by 15 September 2025, after granting due opportunity.

Legal Analysis & Implications

1. Duty to Provide Natural Justice—even in Procedural Matters
   The ruling underscores that procedural fairness must yield where health emergencies impede compliance. The taxpayer’s inability to respond was not due to negligence but a serious medical condition—making continued strict adherence to timelines unfair.
2. Supporting Evidence is Key
   The medical documentation played a pivotal role in affirming that the taxpayer’s inability to respond was genuine. Without such verifiable proof, the relief might not have been granted.
3. Remedial Pathway & Timeline
   • By 26 August 2025: The petitioner must reappear and furnish necessary records to the tax authority.
   • By 15 September 2025: The tax authority must review and pass a fresh order, ensuring the petitioner is heard before making any decision.
4. Policy Insight for Revenue Authorities
   This decision highlights the need for discretionary flexibility when dealing with taxpayers in unavoidable circumstances. Fact-specific adjudication, rather than rigid procedural enforcement, better serves justice.

Takeaways for Stakeholders

Final Thoughts

The Orissa High Court’s August 2025 decision is a noteworthy affirmation of substantive justice over procedural technicalities. It reiterates the principle that a litigant’s serious medical incapacity can be a valid ground for setting aside ex parte actions and ensuring proper adjudicatory recourse.

Do you want help reviewing the fresh order once it’s passed or analyzing whether similar precedents exist across other jurisdictions? Let me know—happy to dive deeper!