GST adjudication order set aside for failing to consider petitioner's reply under Section 73

Orissa HC set aside GST adjudication order dated 20.02.2025 and summary order dated 24.02.2025 passed under Section 73 of GST Act regarding excess input tax credit availment. The adjudicating authority failed to consider petitioner's reply to show-cause notice filed on 20.12.2024 along with supporting documents before passing the order. HC held this constituted violation of principles of natural justice and remitted matter back to adjudicating authority for fresh consideration. The court emphasized that all replies and supporting documents must be examined before adjudication.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the adjudicating authority under the GST Act properly considered the petitioner's detailed reply and supporting documents submitted in response to the show-cause notice alleging excess input tax credit (ITC) availed during the financial year 2020-21;
• Whether the failure to consider the petitioner's reply and documents constitutes a violation of the principles of natural justice;
• Whether the writ petition challenging the Order-in-Original and Summary Order passed under Section 73 of the GST Act is maintainable, given the availability of alternative remedies under the GST Act;
• Whether the impugned demand and penalty orders are sustainable in law in the absence of proper adjudication after considering the petitioner's submissions;
• The procedural and substantive correctness of the adjudication process under the GST Act, specifically compliance with principles of natural justice and jurisdictional facts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Consideration of Petitioner's Reply and Supporting Documents

Relevant Legal Framework and Precedents: The GST Act mandates adjudication proceedings under Section 73 for recovery of tax, interest, penalty, and other amounts when tax credit is found to be wrongly availed. Principles of natural justice require that the adjudicating authority consider all relevant submissions and documents filed by the party before passing an order. The Court relied on a precedent from the Delhi High Court in a similar matter involving excess ITC allegations, where non-consideration of replies led to setting aside the order and remand for fresh adjudication.

Court's Interpretation and Reasoning: The Court scrutinized the Order-in-Original dated 20.02.2025, particularly paragraph 4, which stated that no defense reply was submitted by the petitioner. However, the petitioner had uploaded a detailed reply along with necessary supporting documents on 20.12.2024 in Form GST DRC-06. The Court found this to be a glaring error as the adjudicating authority clearly ignored the petitioner's response despite it being available on record before the order was passed.

Key Evidence and Findings: The petitioner's reply to the show-cause notice, including reconciliation statements and supporting documents, was submitted online within the stipulated time. The adjudicating authority's own record acknowledged the petitioner's opportunity for personal hearing but failed to consider the uploaded reply. The learned Senior Standing Counsel did not dispute the submission of these documents.

Application of Law to Facts: Ignoring the petitioner's reply and documents amounted to non-adherence to the principles of natural justice, as the petitioner was deprived of a fair opportunity to defend itself. The Court emphasized that the adjudicating authority must consider all relevant submissions before passing an order under Section 73.

Treatment of Competing Arguments: While the opposing counsel argued for dismissal based on availability of alternative remedies, the Court prioritized the fundamental principle of natural justice, which cannot be bypassed by procedural technicalities.

Conclusions: The Court held that the Order-in-Original and Summary Order were vitiated by non-consideration of the petitioner's reply, warranting interference and setting aside of the impugned orders.

Issue 2: Maintainability of the Writ Petition

Relevant Legal Framework and Precedents: Articles 226 and 227 of the Constitution of India empower High Courts to issue writs for enforcement of fundamental rights and for judicial review of administrative actions. However, the doctrine of alternative remedy stipulates that where an efficacious alternative remedy is available under a special statute, writ jurisdiction may be excluded or exercised sparingly.

Court's Interpretation and Reasoning: The learned Senior Standing Counsel contended that the petitioner should have availed the appellate remedies under the GST Act instead of approaching the High Court under Articles 226/227. However, the Court observed that the writ petition was not an attempt to bypass statutory remedies but was filed on the ground of violation of natural justice, which is a fundamental procedural requirement.

Key Evidence and Findings: The Court noted that the adjudicating authority's order contained an error apparent on the face of the record, specifically the denial of having received the petitioner's reply. This procedural irregularity justified the invocation of writ jurisdiction to prevent miscarriage of justice.

Application of Law to Facts: The Court held that where there is a violation of natural justice and an error apparent on the record, the writ jurisdiction is maintainable notwithstanding the availability of alternative remedies.

Treatment of Competing Arguments: The Court balanced the opposing argument on alternative remedy with the petitioner's fundamental right to fair adjudication, ultimately favoring the latter.

Conclusions: The writ petition was held maintainable to address the procedural infirmity in the adjudication process.

Issue 3: Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice include the right to be heard and the rule against bias. These principles are embedded in the adjudicatory process under the GST Act and are essential for ensuring fairness and transparency.

Court's Interpretation and Reasoning: The Court found that the adjudicating authority's failure to consider the petitioner's detailed reply and documents amounted to denial of the right to be heard. The authority's erroneous statement that no reply was filed was a misrepresentation of facts on record.

Key Evidence and Findings: The petitioner's reply was filed online well before the passing of the impugned order. The authority's own record showed that the petitioner exercised the option for personal hearing. Despite this, the reply was disregarded.

Application of Law to Facts: Such non-consideration is a fundamental breach of natural justice and renders the order liable to be set aside.

Treatment of Competing Arguments: The Court did not accept any justification offered for ignoring the petitioner's submissions, emphasizing that procedural fairness cannot be compromised.

Conclusions: The violation of natural justice was established, necessitating quashing of the impugned orders and remand for fresh adjudication.

Issue 4: Directions for Fresh Adjudication

Court's Interpretation and Reasoning: The Court declined to express any opinion on the merits of the case. Instead, it directed the adjudicating authority to take fresh cognizance of the matter after considering the petitioner's reply and documents, and after affording personal hearing.

Key Evidence and Findings: The petitioner was directed to appear before the authority on a specified date with a certified copy of the Court's order. The authority was empowered to proceed with adjudication forthwith or on a convenient date.

Application of Law to Facts: This approach ensures adherence to natural justice and statutory requirements under Section 73 of the GST Act.

Conclusions: The matter was remitted for fresh adjudication in accordance with law and principles of natural justice.

3. SIGNIFICANT HOLDINGS

"In such view of the matter, this Court is of ex facie view that there was glaring non-adherence of principles of natural justice as the Order-in-Original dated 20.02.2025 under Annexure-7 reveals error apparent on the face of the record, which fact could be discerned from narration of the adjudicating authority vide Paragraph-4 of the said Order-in-Original."

"The proper authority has failed to consider the reply to show-cause notice in Form GST DRC-06 (Annexure-6 Series) along with other documents uploaded. This Court, therefore, has no hesitation to set aside the Order-in- Original dated 20.02.2025 vide Annexure-7 as also Summary Order dated 24.02.2025 passed under Section 73 of the GST Act by the Additional Commissioner, GST & Central Excise, Commissionerate, Rourkela- Opposite Party No.1 vide Annexure-8 on the ground of violation of principles of natural justice and remit the matter to the said authority concerned for fresh adjudication."

"Needless to say that this Court has not expressed any opinion on the merit of the case. The facts necessary to decide the point of natural justice as alleged by the petitioner has been discussed on the undisputed position. It is made clear that the adjudicating authority may proceed with the proceeding under Section 73 in accordance with law."

Core principles established include:

• The adjudicating authority under the GST Act must consider all replies and supporting documents filed by the petitioner before passing an order;
• Failure to consider such submissions constitutes violation of the principles of natural justice and renders the order liable to be set aside;
• Writ jurisdiction under Articles 226 and 227 is maintainable to correct such procedural infirmities notwithstanding the availability of alternative remedies;
• Where such violation occurs, the matter must be remitted for fresh adjudication after affording the petitioner a fair opportunity to be heard.

Final determinations:

• The Order-in-Original dated 20.02.2025 and Summary Order dated 24.02.2025 are quashed;
• The matter is remitted to the Additional Commissioner for fresh adjudication in accordance with law and after considering the petitioner's reply and documents;
• The petitioner is directed to appear before the adjudicating authority on the specified date to facilitate fresh adjudication;
• No observation was made on the substantive merits of the excess input tax credit claim, leaving the adjudicating authority free to decide the matter afresh.

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