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 those months the original demands were dropped, but the appellate authority upheld a demand by relying on grounds not raised in the notice to show cause. The court held adjudication must be confined to the grounds in the notice and that audi alteram partem requires opportunity to rebut any new grounds; the appellate order was set aside and the matter remanded for fresh decision after hearing on the proper grounds.

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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.

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