High Court quashes orders reversing Input Tax Credit, stresses importance of procedural compliance.

The High Court quashed all impugned orders reversing Input Tax Credit claimed by dealers due to discrepancies identified by assessing officers. The court emphasized the importance of providing complete information in show cause notices, conducting thorough inquiries before issuing notices, and following prescribed procedures. It directed assessing officers to issue detailed notices, allow objections and hearings, and pass reasoned orders promptly. The judgment warned against delays and allowed dealers to raise all issues during reconsideration. The matters were remitted for fresh consideration with no costs awarded to petitioners.

---

---

Issues: Whether reversal of Input Tax Credit based on mismatch of returns could be sustained when the pre-revision notices did not furnish full particulars and the assessee was not afforded proper opportunity before passing the revised assessment orders.

Analysis: The notices were found to be defective because they did not contain the full invoice-wise particulars and other essential details needed to verify the alleged mismatch, and the web reports relied upon by the Department were not always enclosed. In mismatch cases, the assessing authority must first conduct a proper departmental verification, correlate the records of both dealers, and only thereafter issue a notice containing complete particulars so that an effective reply can be given. The governing circular required invoice-wise mismatch data to be attached to the notice, and the assessment process also had to comply with the principles of natural justice by granting a meaningful opportunity of objection and personal hearing.

Conclusion: The revised assessment orders and consequential demand notices were quashed, and the matters were remanded for fresh consideration with directions to follow the prescribed procedure and decide the issue afresh.

---