Natural justice in GST adjudication: denial of cross-examination and incomplete record review led to fresh reconsideration.

An adverse GST adjudication based materially on facts arising from third-party or departmental proceedings was held to be procedurally defective where the petitioner was denied cross-examination of the officers whose actions formed the basis of the demand; the denial violated natural justice and could not sustain the adjudication. The dispute on input tax credit and transitional credit was also required to be re-examined against statutory conditions, electronic GST returns, supplier data, and legacy records before final denial; on that basis, the demand was set aside for fresh consideration. The matters were remitted for fresh adjudication with cross-examination and record verification.

---

---

Issues: (i) Whether the impugned orders were vitiated for denial of cross-examination of the officers whose actions formed the basis of the adverse GST adjudication; (ii) Whether the denial of input tax credit and transitional credit required reconsideration with reference to electronic records and legacy records before any final demand could be sustained.

Issue (i): Whether the impugned orders were vitiated for denial of cross-examination of the officers whose actions formed the basis of the adverse GST adjudication.

Analysis: The adjudication was founded on materials arising from possession and inspection of the petitioner's premises by officers connected with the secured-creditor proceedings. The petitioner sought to cross-examine those officers, but the request was declined. Since the impugned demand and reversal proceedings rested materially on facts arising from those proceedings, denial of an opportunity to test that material through cross-examination amounted to a procedural defect affecting fairness of the adjudication.

Conclusion: The denial of cross-examination amounted to violation of natural justice and the adjudication could not be sustained on that basis.

Issue (ii): Whether the denial of input tax credit and transitional credit required reconsideration with reference to electronic records and legacy records before any final demand could be sustained.

Analysis: The dispute concerned alleged wrongful availment of input tax credit and denial of transitional credit. The Court noted that such credits are to be tested against statutory conditions, including receipt of supplies, payment to suppliers where relevant, furnishing of returns, and the data available in the GST system and legacy records. It further observed that the Department could verify the petitioner's position from electronic returns, supplier data, and archived records before finally denying credit. On that basis, a fresh adjudication after verification was considered necessary.

Conclusion: The demand relating to input tax credit and transitional credit was set aside for fresh consideration after verification of the relevant electronic and legacy records.

Final Conclusion: The writ petitions were allowed by quashing the impugned orders and remitting the matters for fresh adjudication with an opportunity of cross-examination and further verification of records.

Ratio Decidendi: Where an adverse GST determination materially depends on facts emerging from third-party or departmental proceedings, denial of a reasonable opportunity of cross-examination vitiates the adjudication, and disputed credit claims must be re-examined on the basis of available electronic and legacy records before final denial.

---