Mistaken identity in s.73 GST mismatch case over works contract receipts; show cause notice and tax demand quashed.

Adjudication under s.73 GST Act for alleged mismatch between return disclosures and works contract receipts was challenged on the ground of mistaken identity. The HC held that the record and instructions unequivocally admitted that proceedings were initiated and concluded against the wrong person, as the authority proceeded against an individual with a similar name instead of the actual taxable person. Since the foundation of the show cause notice and consequential demand rested on an admitted factual error, the adjudication order could not be sustained in law. The s.73 order and the corresponding show cause notice were quashed, and the writ petition was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether an adjudication order under Section 73 of the GST Act, based on mistaken identity and erroneous factual assumption regarding receipt of consideration for works contract, is legally sustainable.

1.2 Whether consequent recovery proceedings founded on such erroneous adjudication order can be allowed to continue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of adjudication under Section 73 of the GST Act when based on mistaken facts and incorrect GSTIN

Legal framework (as discussed)

2.1 The adjudication proceedings were initiated and concluded under Section 73 of the Odisha Goods and Services Tax Act, 2017 / Central Goods and Services Tax Act, 2017 on the basis of alleged mismatch in figures disclosed in GSTR-2A and GSTR-3B returns for the tax period December 2018, leading to a demand order dated 27.07.2021.

Interpretation and reasoning

2.2 The Court noted that the foundation of the adjudication was an assumption that the petitioner, identified by GSTIN 21BBPPR1202L1ZR in the name of "Subrat Rout", had received payments towards works executed for the office of the Superintending Engineer, Mahanadi North Division, Jagatpur, during the relevant tax period.

2.3 The petitioner asserted that he had not executed the works in question and had not received any payment for the alleged contracts, and that the adjudication proceedings were initiated and completed without his knowledge, particularly after cancellation of his GST registration.

2.4 The Court took note of a representation by the petitioner to the Superintending Engineer and the subsequent letter dated 11.04.2025 from the Superintending Engineer to the CT & GST authorities, expressly acknowledging that:

(a) The actual payments were made to "Sri Subrat Kumar Rout" holding PAN AWWPR3325B and GSTIN 21AWWPR3325B1ZN.

(b) No payments were made to the petitioner, holding GSTIN 21BBPPR1202L1ZR.

(c) During return filing, the petitioner's GSTIN was inadvertently entered instead of the GSTIN of "Sri Subrat Kumar Rout", amounting to a clerical error in furnishing TDS details.

2.5 The Department, through written instructions placed before the Court, accepted the factual error and confirmed that:

(a) The two works bills with total taxable value of Rs. 15,83,500/- were paid to "Sri Subrat Kumar Rout" and not to the petitioner.

(b) Cross-verification of bank account details established that the petitioner had not received the payments referred to in the show cause notice.

2.6 On this admitted factual matrix, the Court held that the adjudication process under Section 73 had been initiated and culminated against the wrong person, namely, "Subrat Rout" (the petitioner), instead of the actual contractor "Subrat Kumar Rout".

2.7 The Court emphasized that where the very basis of the proceedings-receipt of consideration for specified works contracts by the noticee-is factually incorrect and stands disproved by the records and departmental admission, the adjudication cannot be sustained in law.

Conclusions

2.8 The Court concluded that the adjudication order dated 27.07.2021 passed under Section 73 of the GST Act, founded on mistaken identity and erroneous factual assumption of receipt of payment by the petitioner, is unsustainable.

2.9 Accordingly, the order dated 27.07.2021 passed under Section 73 in connection with show cause notice dated 30.04.2021 pertaining to tax period December 2018 was quashed.

Issue 2: Validity of recovery proceedings premised on the erroneous adjudication order

Interpretation and reasoning

3.1 The recovery proceedings were initiated through a notice for recovery dated 29.03.2025, which the petitioner received and which first brought to his notice the existence of the adjudication order and demand.

3.2 The Court recognized that the recovery proceedings were entirely dependent on, and derivative of, the adjudication order passed under Section 73. There was no independent factual or legal basis for recovery apart from that order.

3.3 Since the Department itself admitted that no payment was made to the petitioner and that the GSTIN included in the returns and TDS details was wrongly entered, the Court accepted that the foundation for the demand and consequent recovery was factually untenable.

3.4 Once the Court found that the adjudication order itself could not stand due to mistake of fact and wrong identity, it followed that any recovery action based on such order would also be without authority and liable to be struck down.

Conclusions

3.5 By quashing the adjudication order dated 27.07.2021 and the underlying show cause notice dated 30.04.2021, the Court effectively rendered the recovery proceedings unsustainable.

3.6 The writ petition was allowed, and all pending interlocutory applications were disposed of, with the result that the impugned demand and consequential recovery steps against the petitioner stand annulled.

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