2026 (2) TMI 388 - HC - GST

Input Tax Credit denial for supplier nonfiling of GSTR3B set aside; appellate reliance beyond notice remanded.

Denial of input tax credit was premised solely on the supplier's nonfiling of Form GSTR3B for specified months; when the supplier later filed returns for ... Input Tax Credit denial linked to supplier's non-filing of Form GSTR-3B - travel beyond the confines of the notice to show cause - statutory limitation on adjudication to grounds in notice to show cause under Section 75(4) and second proviso to Section 107(11) of the said Act of 2017 - obligation to afford opportunity to rebut grounds not raised in notice (audi alteram partem) - remand for fresh decision after affording opportunity of hearing - HELD THAT:- It is noticed that the only point canvassed in the notice to show cause that formed the foundation of the proceeding under Section 73(1) of the said Act of 2017 initiated against the petitioner was that the petitioner’s supplier had not filed its return in Form GSTR-3B for the months of August, 2019 to October, 2019. Since, that was the only issue, therefore upon the returns for the months of August, 2019 and September, 2019 being filed by the petitioner’s supplier, the proper officer/adjudicating authority dropped the demands in respect of the aforesaid months and confirmed the demand in so far as the October, 2019 is concerned, (as no return had been filed in respect of the said month even during the pendency of the adjudication proceedings). Upon the return being filed even in respect of October, 2019, during the pendency of the appellate authority proceeding, there was no reason for the appellate authority to not adopt the same standard that had been adopted by the proper officer/adjudicating authority. The appellate authority has tried to upset the petitioner’s case on certain grounds which were never raised against the petitioner in the notice to show cause. It is settled that any adjudicating authority whether original or appellate cannot travel beyond the confines of the notice to show cause and an order passed on grounds extraneous to the notice to show cause would be become vulnerable on that score alone. Such principle has been given statutory recognition both in Section 75(4) as well as the second proviso to Section 107(11) of the said Act of 2017. In such view of the matter, the appellate order dated 23rd October 2024, impugned herein is set aside. Issues: (i) Whether an appellate authority may confirm a demand on grounds other than those specified in the notice to show cause without affording the affected party an opportunity to meet those new grounds.Issue (i): Whether an appellate authority may confirm a demand on grounds other than those specified in the notice to show cause without affording the affected party an opportunity to meet those new grounds.Analysis: The proceedings originated from a notice to show cause alleging excess availment of input tax credit because the supplier had not filed specified monthly returns. During adjudication and appeal the supplier filed the outstanding returns. Statutory provisions recognise limitations on adjudication to the grounds set out in the notice and require procedural fairness; Section 75(4) and the second proviso to Section 107(11) embody these constraints. Where an appellate authority proposes to decide on a ground extraneous to the notice to show cause, procedural fairness requires that the affected party be given notice of and an opportunity to rebut such ground before a demand is confirmed. The appellate authority in the present matter confirmed the demand on new grounds that were not the subject of the original notice and did not afford an opportunity to the affected party to meet those grounds.Conclusion: The appellate authority acted improperly in confirming the demand on grounds not contained in the notice to show cause without affording an opportunity to rebut those grounds; the appellate order is set aside and the matter is remanded for fresh decision after giving the petitioner an opportunity of hearing on all points the appellate authority proposes to rely upon.Final Conclusion: The order under challenge is set aside and the matter is remitted to the appellate authority for fresh adjudication in accordance with law after affording the petitioner a chance to file submissions and to reply to any queries or new grounds.Ratio Decidendi: An adjudicating or appellate authority may not sustain or confirm a demand on grounds extraneous to the notice to show cause without first informing the affected party of those grounds and affording an opportunity to be heard; where new grounds are relied upon, the matter must be remitted for fresh decision after allowing the party to meet those grounds.