Input tax credit mismatch assessments require fresh verification under Circular No. 5 of 2021, with natural justice safeguards.

Assessments based on alleged input tax credit mismatch had to be re-determined under Circular No. 5 of 2021, because the prescribed procedure required verification of buyer and seller data, notice to the dealer, an opportunity to explain the discrepancy, enquiry, and compliance with natural justice before finalisation. Since that exercise had not been completed, the assessments were set aside for fresh consideration. On the allegation of no actual movement of goods, the matter was kept open because connected proceedings and a pending authoritative decision were relevant; the assessments on that issue were to be reconsidered in light of the binding legal position that would emerge.

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Issues: (i) whether the assessments based on alleged mismatch of Input Tax Credit required re-determination in terms of Circular No. 5 of 2021; (ii) whether the assessments could be sustained on the allegation that there was no actual movement of goods.

Issue (i): whether the assessments based on alleged mismatch of Input Tax Credit required re-determination in terms of Circular No. 5 of 2021.

Analysis: The mismatch issue was governed by the procedure prescribed in Circular No. 5 of 2021, which required verification of the buyer and seller data, notice to the dealer, opportunity to explain the discrepancy, enquiry, and compliance with the principles of natural justice before finalising the assessment. Since the existing assessments had not fully proceeded in accordance with the circular, a fresh exercise was required.

Conclusion: The assessments on the mismatch issue were set aside for fresh consideration in accordance with Circular No. 5 of 2021.

Issue (ii): whether the assessments could be sustained on the allegation that there was no actual movement of goods.

Analysis: The question of movement of goods was already engaging consideration in connected proceedings, and the Supreme Court had also pronounced on the same subject in a comparable statutory setting. The proper course was to await the outcome of the connected appeal and then complete the assessments in the light of the binding legal position that would emerge.

Conclusion: The assessment on the movement-of-goods issue was not finally sustained and was directed to be reconsidered after the connected decision.

Final Conclusion: The impugned assessments were annulled and the matters were remitted for fresh assessment after compliance with the governing circular and the pending authoritative decision on the movement-of-goods issue.

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