CGST tax demand adjudication ignoring show-cause reply and hearing; rectification to be decided in four weeks, recovery stayed.

The dominant issue was breach of natural justice in adjudication under CGST, as the adjudicating authority allegedly failed to consider the taxpayers' reply to the show-cause notice and denied a personal hearing; however, since a rectification application was already pending and could render the demand unsustainable, the HC directed the proper officer to decide the rectification application within four weeks, leaving merits open. Pending disposal of rectification, and noting that more than 20% of disputed tax had already been recovered, the HC restrained further recovery pursuant to the impugned order.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, in view of a pending application for rectification before the proper officer, the Court should direct expeditious disposal of that rectification application rather than examine the merits of the adjudication order.

(ii) Whether further recovery on the strength of the impugned adjudication order should be restrained during pendency of the rectification application, particularly where recovery in excess of 20% of the disputed tax is asserted to have already been effected from the electronic credit ledger.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Direction for disposal of pending rectification application

Legal framework (as discussed): The Court noted that the adjudication order was passed under Section 73 of the WBGST Act, 2017/CGST Act, 2017, and recorded that the petitioners had already invoked the remedy of rectification before the adjudicating/proper officer, which remained pending.

Interpretation and reasoning: The Court treated the pendency of the rectification application as material because the petitioners asserted that if rectification is decided in their favour, the demand raised by the adjudication order "may not survive". On that basis, the Court considered it appropriate to ensure the rectification route is first decided by the statutory authority, instead of the Court entering into merits in writ jurisdiction.

Conclusions: The Court directed the proper officer concerned to "consider and dispose of" the rectification application within four weeks from communication of the order. The Court further allowed the petitioners to file an additional representation in support of rectification within one week.

Issue (ii): Interim restraint on further recovery during pendency of rectification

Legal framework (as discussed): The Court considered recovery initiated on the strength of the impugned adjudication order and relied on the petitioners' production of electronic credit ledger printouts indicating recovery already effected.

Interpretation and reasoning: The Court recorded the submission that a sum in excess of 20% of the disputed tax had already been recovered. To prevent further coercive recovery while the rectification application (which could potentially impact survivability of the demand) remained undecided, the Court found it appropriate to stall further recovery, but conditioned the protection on verification from records.

Conclusions: The Court directed that, until the rectification application remains pending, the authorities "should not proceed to recover any further sum" on the strength of the impugned order, provided the authorities are satisfied from the records that an amount in excess of 20% of the tax in dispute has already been recovered. The Court expressly declined to examine merits and left all points open for decision by the proper officer in accordance with law.

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