Failure to disclose verification reports and deny opportunity to respond breaches natural justice, requiring quash and remand for fresh consideration.

Failure to furnish verification reports that materially informed adverse findings in a tax adjudication and to grant the affected party a meaningful opportunity to address those reports breached principles of natural justice; the HC quashed the impugned adjudication order and remitted the matter for de novo consideration. The court found the adjudicating officer proceeded on incomplete and hurried verification, that verification reports prepared on specified dates were not supplied to the petitioner, and that denial of opportunity prevented rectification of TRAN entries and consideration of documentary evidence. The matter is remitted with directions to furnish reports, grant hearing, and decide afresh within two months.

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Issues: Whether the impugned adjudication order dated 5th February 2025, which denied the Petitioner copies of verification reports and proceeded without granting an opportunity to deal with those reports in relation to transition of input tax credit, breached the principles of natural justice and required quashing and remand for fresh consideration.

Analysis: The Court examined the record of correspondence, the show cause notice process, the verification reports prepared on 27th January 2025 and 3rd February 2025, and the personal hearing held on 4th February 2025. The impugned order records that not all invoices were verified due to the large declared stock and notes submissions regarding columns of TRAN-1/TRAN-2 entries; the verification reports were influential in the conclusions reached. The Court found that the verification reports were not furnished to the Petitioner and that the adjudicating officer proceeded on an apparently hurried and incomplete verification of documents. The absence of furnishing verification reports and a meaningful opportunity to address observations in those reports resulted in the Petitioner being unable to rectify alleged classification/column errors or to have the cited documentary evidence considered before adverse conclusions were drawn.

Conclusion: The impugned order dated 5th February 2025 is quashed and set aside. The proceedings are remitted to the adjudicating authority for de novo consideration. The adjudicating authority is directed to furnish the verification reports to the Petitioner, grant an opportunity of hearing to permit rectification of entries and to decide the matter afresh in accordance with law within two months.

Ratio Decidendi: Where verification reports materially inform adverse findings in tax adjudication, failure to furnish those reports and deny the affected party an opportunity to respond violates the principles of natural justice and requires quashing and remand for fresh adjudication after giving the party the requisite opportunity to be heard.

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