Natural justice bars input tax credit disallowance without supplying adverse material and giving a meaningful hearing.

Disallowance of input tax credit could not be sustained where adverse material from the investigation branch was not supplied and the taxpayer was not given an effective opportunity to reply or be heard. The assessment order merely referred to undisclosed findings, without showing that they were furnished or put to the taxpayer for response, which breached the principles of natural justice. The assessment was set aside and the matter remanded for fresh adjudication by a different officer after supply of the relevant material, opportunity of reply, personal hearing, and a reasoned order.

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Issues: Whether the disallowance of input tax credit could be sustained when the material from the investigation branch was not supplied to the petitioner and no effective opportunity of reply or hearing was given.

Analysis: The impugned assessment order contained only a bare reference to findings from the investigation branch and did not disclose what those findings were, whether they were furnished to the petitioner, or whether the petitioner was called upon to meet them. In these circumstances, the petitioner was denied a proper hearing and a meaningful opportunity to explain its case. The absence of prior supply of the adverse material and the failure to afford a fair hearing amounted to a breach of the principles of natural justice. The matter therefore required fresh adjudication by a different officer with supply of the relevant material, opportunity for reply, personal hearing, and a reasoned order dealing with all submissions.

Conclusion: The disallowance could not be sustained and the assessment order was set aside with a remand for de novo consideration in favour of the petitioner.

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