Input tax credit reversal and manufacturing loss claims may be reopened on conditions, with objections and hearing allowed after deposit.

Input tax credit reversal based on alleged manufacturing loss and non-filing of stock transfer particulars was discussed in the context of an enforcement inspection, with the Court stressing that manufacturing loss must be determined on a scientific basis and after a realistic inspection of the dealer's factory and process. Although the assessee had not acted diligently, the Court considered that one further opportunity could be granted to avoid prejudice. The assessment orders were not quashed outright; instead, the assessee was permitted to treat them as show-cause notices, file objections, and obtain a personal hearing after payment of 15% of the disputed tax for each assessment year.

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Issues: Whether the assessment orders could be interfered with for denial of adequate opportunity and whether the matter should be re-done after granting the assessee one further opportunity subject to payment of a portion of the disputed tax.

Analysis: The assessment arose from an enforcement inspection and proposed reversal of input tax credit based on alleged manufacturing loss and non-filing of stock transfer particulars. The Court noted that manufacturing loss must be determined on a scientific basis and referred to earlier directions requiring inspection of the dealer's factory and a realistic assessment of the actual process. In the facts, the Court found that the assessee had not acted diligently, but also considered that one more opportunity could be granted to avoid prejudice. Relief was therefore made conditional on payment of 15% of the disputed tax for each assessment year, after which the assessee could treat the assessment orders as show cause notices, file objections, and obtain personal hearing.

Conclusion: The assessment orders were not quashed outright, but the assessee was granted a conditional opportunity to reopen the assessments and contest them on merits after complying with the deposit condition.

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