Excess input tax credit mismatch in GSTR-3B vs GSTR-2A, no personal hearing; disallowance order set aside for re-adjudication.

The dominant issue was whether an adjudication order disallowing alleged excess ITC (claimed in GSTR-3B vis-à-vis GSTR-2A) was vitiated for breach of natural justice where the taxpayer did not reply to notices but was not granted a personal hearing. The HC held that the proceedings were also impacted by pending consideration of the validity of relevant GST Notifications before the SC, warranting reconsideration. On these bases, the HC set aside the impugned orders and remitted the matter to the adjudicating authority to re-adjudicate afresh in accordance with law and directions, resulting in the petition being allowed by remand.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the adjudication order confirming tax, interest and penalty, passed ex parte under Section 73(9) of the CGST/KGST Act for the relevant tax period, warranted interference and remand to enable the taxpayer to file reply/documents and be heard.

(ii) Whether, in view of the pending adjudication before the Supreme Court concerning the validity/effect of notifications relied on for extension of limitation under Section 73(10), the adjudicating authority should be directed to pass a fresh adjudication order only after the Supreme Court's decision, and how limitation should be protected in the interregnum.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Interference with ex parte adjudication and grant of opportunity

Legal framework: The Court noted that the show-cause notice was issued under Section 73(1) and the adjudication order was passed under Section 73(9) of the CGST/KGST Act for the relevant tax period, on the allegation of excess ITC claimed in GSTR-3B as compared to GSTR-2A.

Interpretation and reasoning: The Court proceeded on the basis that the taxpayer had not replied to the notice and the adjudication culminated in an ex parte demand. The taxpayer asserted that the notices went unnoticed, resulting in non-filing of reply/documents, and sought an opportunity to submit reply and supporting material. Considering the circumstances and submissions, the Court formed the view that one more opportunity ought to be granted by setting aside the impugned adjudication order and remitting the matter for reconsideration in accordance with law.

Conclusions: The Court allowed the petition to the extent of setting aside the impugned adjudication order and remitting the matter to the adjudicating authority for fresh consideration and a fresh adjudication order in accordance with law.

Issue (ii): Effect of pending Supreme Court proceedings on limitation-extension notifications; timing of fresh adjudication; exclusion of time for limitation

Legal framework: The taxpayer contended that the proceedings were barred by limitation under Section 73(10) of the KGST Act, while the revenue contended that limitation stood extended by notifications. The Court considered the submission that the validity of such notifications was seized of by the Supreme Court in a pending special leave matter, which would have a bearing on the impugned proceedings.

Interpretation and reasoning: To avoid multiplicity of proceedings and conflicting orders, the Court determined that the adjudicating authority should reconsider and issue a fresh adjudication order only after the Supreme Court disposes of the pending special leave matter, since that decision may impact the limitation question and the proceedings founded on the asserted extension.

Conclusions: The Court directed the adjudicating authority to pass a fresh adjudication order in accordance with law after the Supreme Court's disposal of the pending special leave matter. It further directed that the period between the date of the impugned adjudication order and the date of disposal of the special leave matter by the Supreme Court shall stand excluded for the purpose of limitation.

---