Excess input tax credit claim under disputed tax notifications: ex parte denial set aside, case remitted pending SLP outcome.

The dominant issue was whether ex parte adjudication and appellate orders denying the taxpayer's claim relating to alleged excess input tax credit could stand when the validity of the underlying notifications was pending before the SC. The HC held that, to avoid conflicting decisions and multiplicity of proceedings, natural justice and judicial comity required granting a further opportunity and deferring a final determination until after disposal of the pending SLP concerning the notifications. Consequently, the impugned adjudication orders and the appellate order were set aside, and the matter was remitted to the authority to reconsider afresh and pass a fresh adjudication order in accordance with law after the SC's decision.

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1. ISSUES PRESENTED AND CONSIDERED

(a) Whether ex parte adjudication orders under Section 73(9) and the appellate order dismissing the statutory appeal for non-prosecution should be set aside and the matters remitted for fresh adjudication, in circumstances where the assessee asserted that the notices/orders uploaded on the GST portal went unnoticed and no reply was filed.

(b) Whether recovery proceedings through third-party attachment notices could be sustained when the underlying adjudication and appellate orders were being set aside and the matters were being remitted.

(c) Whether, given that the validity/effect of limitation-extension notifications was stated to be pending before the Supreme Court, the fresh adjudication should be deferred until that decision, and whether time should be excluded for limitation during the interregnum.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Setting aside ex parte adjudication orders and the appellate dismissal; remand for fresh decision

Legal framework (as discussed): The Court addressed adjudication under Section 73(9) of the KGST Act and appellate proceedings under Section 107.

Interpretation and reasoning: The Court noted that show-cause notices were issued for two tax periods alleging excess input tax credit, that no replies were filed, and that adjudication orders followed ex parte. The Court also noted that the statutory appeal against one adjudication order was dismissed for non-prosecution. Considering the submission that the notices/orders were uploaded under "View Additional Notices & orders" on the common GST portal and allegedly went unnoticed, and that the assessee sought an opportunity to file reply/documents, the Court held that "one more opportunity" was warranted. The Court further reasoned that the pending consideration by the Supreme Court concerning the relevant notifications could have a bearing on the impugned proceedings, justifying interference and remand to avoid multiplicity and conflicting outcomes.

Conclusions: The Court allowed the petition, set aside the ex parte adjudication orders and the appellate order dismissing the appeal for non-prosecution, and remitted the matters to the adjudicating authority for reconsideration and fresh adjudication in accordance with law, to be undertaken after disposal of the pending Supreme Court proceedings referred to in the order.

(b) Validity of third-party attachment/recovery notices pending remand

Interpretation and reasoning: The Court recorded that recovery proceedings were initiated through third-party attachment notices issued after the adjudication and appellate orders. Since the Court found it appropriate to set aside those underlying orders and remit the matters for fresh adjudication, it followed that the recovery steps premised on those set-aside orders could not stand.

Conclusions: The Court set aside the third-party attachment notices identified in the order, thereby nullifying the impugned recovery action during the remand period.

(c) Impact of pending Supreme Court proceedings on limitation-extension notifications; deferment of adjudication and exclusion of time for limitation

Legal framework (as discussed): The Court noted the contention that proceedings were alleged to be barred by limitation under Section 73(10), and the revenue's contention that limitation stood extended by notifications; it also took note of the submission that the validity/effect of such notifications was pending consideration before the Supreme Court and would impact the present proceedings.

Interpretation and reasoning: Without deciding the limitation dispute on merits, the Court treated the pendency before the Supreme Court as a material circumstance having a "bearing" on the impugned proceedings. To avoid multiplicity of proceedings and potential conflicting determinations, the Court directed that fresh adjudication be undertaken only after disposal of the Supreme Court matter. To balance this deferment, the Court ordered exclusion of the intervening period for limitation computation.

Conclusions: The Court directed the adjudicating authority to pass fresh adjudication orders only after disposal of the identified pending Supreme Court proceedings, and ordered that the period between the dates of the impugned adjudication orders and the date of disposal by the Supreme Court "shall stand excluded for the purpose of limitation."

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