2026 (2) TMI 325 - HC - GST

Rectification under GST and ITC reconciliation rejected without hearing; order set aside and remitted for fresh adjudication

Rectification under the GST regime was challenged on grounds that an application to correct ITC reconciliation was rejected without affording opportunity ... Rectification u/s 161 of the GST Act - reconciliation of Input Tax Credit (ITC) - principles of natural justice and opportunity of hearing - assessment u/s 73 of the GST Act - verification of records on the GST portal - HELD THAT:- On perusal of record, it is manifest that to the notice seeking additional information by the concerned authority, a reply dated 7th August, 2025 was filed enumerating exhaustively with respect to the requirement of reversal of ITC as suggested by the authority concerned. The petitioner during the course of hearing drew attention to such reply where it is categorically stated that “ITC reconciliation statement along with input tax credit and corresponding credit note reversal statement incorporated in consolidated GSTR-3B”. Such reply also depicts that point-wise enumeration with respect to each alleged transaction was submitted. It is revealed from Assessment Order that such reply was discarded as there was absence of original credit notes along with purchase invoices and issuance of credit notes by the suppliers. It is emphatically submitted that the application filed under Section 161 of the GST Act could not have been rejected without affording opportunity of hearing. This aspect remained uncontroverted by the opposite parties. The order dated 1st September, 2025 rejecting application for rectification could not have been passed merely quoting the provisions under Section 161 of the OGST Act. Without assigning reasons for not accepting the documents stated to have been submitted and declining to verify the evidence available on the portal the rejection of application suffers from infirmity in law. It does not emanate from said order dated 01.09.2025 rejecting the application for rectification that the aforesaid documents as produced by the petitioner have been given due consideration by the Assistant Commissioner of CT & GST, Bhubaneswar-1 Circle, Bhubaneswar nor does it reveal before rejection any opportunity of personal hearing was given. Thus, this Court perceives that the Order dated 1st September, 2025 (Annexure-9) passed by the Assistant Commissioner of CT & GST, Bhubaneswar-1 Circle, Bhubaneswar rejecting the application for rectification dated 29th March, 2025 is bereft of reason and hence, the same is liable to be set aside. Having set aside the Order, the case is remanded to the aforesaid authority with the direction that the application for rectification dated 29th March, 2025 be disposed of having regard to the ground taken therein along with supporting documents/records available on the portal as stated to have been uploaded and/or to be produced, as it had not been afforded adequate opportunity to present its case during the course of the proceeding under Section 73 of the GST Act. To avail such opportunity of hearing and proffering explanation before the said Authority by producing records and documents to support fact and figures which have already been uploaded, the petitioner is directed to appear before the Assistant Commissioner of CT & GST, Bhuabneswar-1 Circle, Bhubaneswar within fifteen working days from date. With the observations and directions, the writ petition stands disposed of. Issues: Whether the order rejecting the application for rectification under Section 161 of the GST Act (challenging an adjudication order passed under Section 73) was legally sustainable where the rectification application and reconciliation/portal records were not considered and no opportunity of hearing was afforded.Analysis: The legal framework involves Section 161 (rectification of orders), Section 73 (determination of tax not paid), and Section 65 (audit) of the GST Act, together with the principles requiring consideration of evidentiary material placed on the portal and the requirement to afford an opportunity of hearing before rejecting a rectification application. The rectification application asserted that reconciliation statements and supporting purchase/credit-note data had been uploaded and submitted; the impugned rejection does not disclose reasons for disregarding those records nor does it record that a hearing was afforded. Reliance on administrative guidance concerning treatment of commercial/financial credit notes (Circular No.105/24/2019-GST) is relevant to whether ITC reversal was necessitated. Where an authority rejects a rectification application without considering asserted documentary records available on the portal and without affording an opportunity to be heard, the rejection suffers from legal infirmity and error apparent on the face of record, warranting remand for fresh, reasoned consideration in accordance with statutory provisions and principles of natural justice.Conclusion: The rejection of the rectification application is set aside and the matter is remanded to the adjudicating authority to consider the rectification application afresh, including the reconciliation statements and portal records, and to afford the applicant an opportunity of hearing; the authority shall pass a reasoned order under Section 161 after such consideration.