2025 (1) TMI 1076 - HC - GST

Court Overturns Order for Violating Natural Justice, Remands Case for Fair Hearing on Input Tax Credit Claim.

The court set aside the impugned order dated 24.08.2024, citing a violation of natural justice principles, as the petitioner was not given a fair ... Challenge to impugned order on the premise that the same was made in violation of principles of natural justice - HELD THAT:- The impugned order dated 24.08.2024 is set aside. The petitioner shall deposit 10% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent, within a period of four weeks from the date of receipt of a copy of this order. Petition disposed off. ISSUES: Whether the impugned order rejecting Input Tax Credit (ITC) claim was passed in violation of principles of natural justice. Whether denial of ITC is justified on the ground that the supplier has not paid the taxes or filed GSTR 3B returns. Whether the petitioner is entitled to an opportunity to explain alleged discrepancies before final rejection of ITC claims. Whether payment of a portion of disputed taxes (10%) can be a condition precedent to reconsideration of ITC claims. RULINGS / HOLDINGS: The impugned order dated 24.08.2024 was set aside on the ground that it was passed without affording a reasonable opportunity of hearing, thereby violating the principles of natural justice. The Court held that 'the proposal to reject the petitioner's claim of Input Tax Credit on the premise that the supplier has not paid the taxes so collected cannot result in denial of the benefit of Input Tax Credit to the petitioner.' The petitioner shall be granted one final opportunity to submit objections with supporting documents, treating the impugned order as a show cause notice. Compliance with the condition of depositing 10% of the disputed taxes within the stipulated period is mandatory; failure to do so will result in restoration of the impugned order. RATIONALE: The Court applied the principles of natural justice requiring that no order affecting rights be passed without giving the affected party a reasonable opportunity to be heard. The decision relied on a recent precedent where similar facts led to remand of the matter subject to payment of 10% of disputed taxes, indicating a doctrinal approach balancing revenue recovery with procedural fairness. The Court emphasized that denial of ITC cannot be solely based on the supplier's failure to pay taxes or file returns, recognizing the purchaser's entitlement when taxes have been duly paid to the supplier. The order establishes a procedural framework mandating partial pre-deposit and opportunity to respond before final adjudication, reflecting a shift towards ensuring substantive and procedural fairness in GST assessments.