Input Tax Credit Denial in CGST Assessment Upheld as Petitioner Failed to Exhaust Statutory Remedies Under Section 107

The HC dismissed a writ petition challenging a CGST assessment order that alleged short assessment and wrongful input tax credit. The petitioner claimed the assessing officer failed to comply with Section 42(3) read with Rule 36 of CGST Rules and violated natural justice principles. The Court found that a hearing opportunity was provided on 02.03.2022 before the order's issuance, and an effective remedy was available through the appellate authority under Section 107. The petition was dismissed without prejudice to the petitioner's right to pursue statutory remedies.

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Issues: Challenge to assessment order under CGST Act, compliance with Section 42(3) and Rule 36 of CGST Rules, violation of principles of natural justice, availability of effective remedy before appellate authority.

In this judgment, the petitioner, a registered dealer under the Central Goods and Services Act, challenged the assessment order dated 14.03.2022, alleging short assessment and wrongful input tax credit availed. The petitioner contended that the assessing officer did not comply with Section 42(3) read with Rule 36 of the CGST Rules while issuing the order. It was argued that non-compliance with Section 42(3) rendered the order perverse, justifying intervention under Article 226 of the Constitution of India. Additionally, it was claimed that a reasonable opportunity of hearing was not granted before issuing the order, violating the principles of natural justice.

The Senior Government Pleader argued that the petitioner's contentions could be effectively raised before the appellate authority under Section 107 of the CGST Act. It was highlighted that the registered person was provided a hearing opportunity on 02.03.2022, and thus, there was no breach of natural justice principles. After considering the arguments and examining Section 42(3) of the Act along with the observations in the impugned order, the Court concluded that the petitioner had a suitable remedy available before the appellate authority. The Court found that the circumstances, including the hearing opportunity granted before the order issuance, did not justify interference under Article 226 of the Constitution of India.

Consequently, the Court held that the writ petition was to be dismissed, with the petitioner retaining the liberty to present all arguments raised in the petition before the appellate authority. The dismissal of the writ petition was without prejudice to the petitioner's right to pursue the statutory remedy available, emphasizing the importance of addressing the issues through the appropriate appellate channels.

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