GST authority's failure to consider statutory forms and denial of hearing opportunity violates natural justice principles despite Section 107 appeal availability

Kerala HC held that despite availability of appeal under Section 107 CGST Act, writ petition was maintainable due to violation of natural justice principles. The assessing authority failed to properly consider statutory forms and documents submitted by petitioner during adjudication proceedings and refused opportunity to explain data discrepancies available in GST portal. Authority's admission of inability to reconcile portal data with petitioner's submissions, coupled with failure to grant hearing, constituted procedural violation warranting judicial intervention. Appeal allowed.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• Whether the learned Single Judge was correct in dismissing the writ petition on the ground that the petitioner should avail the alternate remedy of appeal under Section 107 of the CGST Act rather than seeking writ relief.
• Whether the principles of natural justice were violated by the assessing authority (1st respondent) in failing to consider the relevant documents produced by the petitioner during the adjudication proceedings.
• Whether the assessing authority properly applied its mind to the reconciliation of input tax credit (ITC) data submitted by the petitioner vis-`a-vis the data auto-populated in the GST portal, specifically the mismatch between GSTR-2A and GSTR-3B returns.
• Whether the order of assessment and penalty under Section 73 read with Section 20 of the IGST Act and CGST Act was sustainable in the absence of an opportunity to explain discrepancies and produce additional evidence.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of Writ Petition vis-`a-vis Alternate Remedy under Section 107 CGST Act

Relevant legal framework and precedents: Section 107 of the CGST Act provides an appellate remedy against orders passed under the Act. The principle that statutory appeals are the appropriate forum for challenging such orders is well-established, and writ petitions are generally not entertained when an efficacious alternative remedy exists.

Court's interpretation and reasoning: The learned Single Judge had dismissed the writ petition on the ground that the petitioner should pursue appeal under Section 107. The Court acknowledged this principle but observed that the facts of the present case warranted an exception, given the failure of the assessing authority to consider relevant documents and the violation of natural justice.

Application of law to facts: The Court found that the petitioner's grievance was not merely about challenging the assessment but about the procedural irregularity and denial of opportunity to reconcile data and explain discrepancies. This procedural defect justified interference by the writ jurisdiction despite the existence of an alternate remedy.

Conclusions: The Court held that the petitioner need not be relegated to the alternative remedy of appeal in the peculiar facts and circumstances of the case.

Issue 2: Violation of Principles of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require that a party affected by an adverse order must be given a fair opportunity to present its case, including an opportunity to produce relevant evidence and explain any discrepancies.

Court's interpretation and reasoning: The petitioner contended that the assessing authority ignored the relevant annexures and documents submitted during the personal hearing and in written submissions. The Court noted that the assessing authority did not afford any opportunity to the petitioner to explain the mismatch between ITC claimed and ITC auto-populated in the GST portal.

Key evidence and findings: The respondent's affidavit admitted that the petitioner had submitted data generated from its in-house computer systems, but the assessing authority found that these were not reconcilable with the GST portal data. However, the order did not reflect any attempt to seek explanation or grant an opportunity to reconcile the differences.

Treatment of competing arguments: The respondent argued that the petitioner failed to produce relevant documents to substantiate the claim and that the data was not verifiable from the GST portal. The petitioner argued that the documents were statutory returns and it was incumbent on the authority to verify their genuineness and allow reconciliation.

Application of law to facts: The Court found that the assessing authority's failure to seek explanation or grant an opportunity to reconcile the data amounted to non-application of mind and violation of natural justice.

Conclusions: The Court concluded that the order passed without affording the opportunity to explain discrepancies was vitiated by violation of natural justice.

Issue 3: Proper Application of Mind to Reconciliation of ITC Data

Relevant legal framework and precedents: Under the CGST Act and related rules, input tax credit claims must be reconciled with supplier's returns and statutory forms like GSTR-2A and GSTR-3B. Discrepancies must be examined with due diligence and opportunity for explanation given.

Court's interpretation and reasoning: The Court noted that the assessing authority's stand evolved during proceedings and in affidavit filed before the Court, admitting inability to reconcile the petitioner's data with GST portal data. The impugned order did not reflect such inability or any attempt to seek clarification.

Key evidence and findings: The petitioner had reversed ITC where payments were not made within 180 days and reclaimed ITC upon payment, reflected in statutory returns. The assessing authority did not consider this explanation or the annexures submitted.

Treatment of competing arguments: The respondent contended that the petitioner's data was not verifiable or relatable to statutory returns. The petitioner maintained that the statutory returns themselves were the documentary evidence and the authority should have verified them.

Application of law to facts: The Court emphasized that the assessing authority was obligated to verify statutory returns and allow reconciliation rather than reject claims summarily.

Conclusions: The Court found that the assessing authority failed to apply its mind properly to the reconciliation process and thus committed an error.

Issue 4: Validity of Assessment and Penalty Order under Section 73 and Section 20 IGST Act

Relevant legal framework and precedents: Section 73 of the CGST Act deals with determination of tax not paid or short paid, including penalty provisions. Section 20 of the IGST Act relates to determination of tax liability on inter-state supplies. Procedural fairness and adherence to natural justice are prerequisites for valid orders.

Court's interpretation and reasoning: The Court found that the penalty and tax demand were based on the impugned order which ignored relevant evidence and denied an opportunity to explain discrepancies.

Application of law to facts: Since the order was vitiated by procedural irregularity and non-application of mind, the assessment and penalty imposed could not be sustained.

Conclusions: The Court set aside the impugned order and directed the assessing authority to rehear the matter after affording opportunity to the petitioner.

3. SIGNIFICANT HOLDINGS

The Court held: "If, as a matter of fact, the 1st respondent had any doubt to undertake the reconciliation of the facts and figures as reflected in the documents presented before the appellant and with that of the one which is uploaded in the portal, then the 1st respondent ought to have afforded an opportunity to the appellant to explain the discrepancies. Having not chosen to do so, would vitiate Ext.P4 order."

Core principles established include:

• The existence of an alternate statutory remedy does not preclude writ jurisdiction where there is a violation of natural justice or procedural irregularity.
• Assessing authorities under the CGST Act must apply their mind to reconcile ITC claims with statutory returns and cannot reject claims summarily without affording an opportunity to explain discrepancies.
• Denial of opportunity to produce evidence or explain mismatches in statutory returns constitutes a breach of principles of natural justice and vitiates the order.

Final determinations on each issue were:

• The writ petition was maintainable in the facts of the case despite the availability of an appeal under Section 107 CGST Act.
• The assessing authority's failure to consider relevant documents and refusal to grant hearing on reconciliation amounted to violation of natural justice.
• The impugned order of assessment and penalty was set aside as unsustainable.
• The matter was remanded to the assessing authority for fresh adjudication after affording the petitioner an opportunity to explain discrepancies and produce additional evidence.

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