Input tax credit reversal needs cogent material and hearing; mismatch data or seller registration cancellation alone is not enough.

Input tax credit cannot be reversed merely because of mismatch in departmental particulars or cancellation of the seller's registration; the assessing authority must examine whether the transaction was genuine, compare the cancellation date with the invoice date, and rely on cogent material before treating purchases as bogus. Mere non-filing of objections does not permit automatic confirmation of pre-assessment proposals. Any material used to deny credit must be furnished to the assessee, and a reasonable opportunity of hearing must be given before finalising the assessment. On these grounds, the assessment orders were set aside and the matters remitted for fresh assessment after compliance with natural justice.

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Issues: (i) whether reversal of input tax credit could be sustained on the basis of mismatch in particulars and cancellation of sellers' registration certificates, and (ii) whether the assessment orders could stand when no effective opportunity and no relevant material were furnished before confirmation of the proposals.

Issue (i): whether reversal of input tax credit could be sustained on the basis of mismatch in particulars and cancellation of sellers' registration certificates.

Analysis: The liability arose mainly from alleged mismatch between departmental data and the petitioner's returns, and from cancellation of the sellers' registration certificates. The mismatch-based additions were found to suffer from absence of material particulars in both the pre-assessment notices and the assessment orders. As to cancellation of registration, the relevant date of cancellation had to be compared with the invoice date, and a later cancellation could not affect genuine transactions already completed. Even where the cancellation date preceded the invoice date, the effect of the cancellation order had to be examined in the light of when the transaction was concluded and whether the purchases were genuine.

Conclusion: Reversal of input tax credit was not mechanically sustainable on these grounds and required fresh examination.

Issue (ii): whether the assessment orders could stand when no effective opportunity and no relevant material were furnished before confirmation of the proposals.

Analysis: The Court held that mere non-filing of objections did not authorise automatic confirmation of the pre-assessment proposals. Before reversing input tax credit, the assessing authority had to reach a definite conclusion on the basis of cogent and substantial material that the transactions were bogus or not genuine, and any such material had to be supplied to the assessee. The petitioner was also entitled to a reasonable opportunity of hearing before the assessment was finalised.

Conclusion: The assessment orders could not be sustained and were set aside, with liberty to redo the assessments after granting opportunity and furnishing material.

Final Conclusion: The writ petitions were allowed in part, the impugned assessment orders were set aside, and the matters were remitted for fresh assessment after compliance with natural justice, subject to the petitioner's tax deposit as directed.

Ratio Decidendi: Input tax credit cannot be denied or reversed merely because of mismatch data or cancellation of the seller's registration unless the assessing authority establishes, with cogent material and after supplying such material and hearing the assessee, that the transactions were bogus or not genuine.

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