Natural justice in input tax credit mismatch disputes requires fair consideration of reconciliation before confirming liability.

A fiscal adjudication based on mismatch in input tax credit was held to require fair consideration of the taxpayer's reconciliation materials before liability could be confirmed. The court noted that the reply to the show-cause notice was referred to, but the accompanying reconciliation statement was not dealt with while recording findings. Because the dispute turned on a factual explanation of the alleged discrepancy, principles of natural justice required a proper opportunity to place and explain the reconciliation. The adjudication order was therefore annulled and the matter remitted for fresh consideration after giving that opportunity.

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Issues: (i) Whether the impugned order was liable to be set aside for want of adequate opportunity and consideration of the reply and reconciliation materials; (ii) whether the dispute relating to mismatch in input tax credit required reconsideration after affording an opportunity to explain the reconciliation.

Issue (i): Whether the impugned order was liable to be set aside for want of adequate opportunity and consideration of the reply and reconciliation materials.

Analysis: The challenge was founded on violation of principles of natural justice, including the absence of a proper opportunity to place the reconciliation statement on record. The reply to the show-cause notice had been referred to in the impugned order, but the reconciliation material said to accompany the reply was not dealt with while recording findings. As the controversy turned on the factual explanation of the alleged discrepancy, the authority was required to examine the explanation before concluding on liability.

Conclusion: The order was liable to be set aside and the matter required reconsideration.

Issue (ii): Whether the dispute relating to mismatch in input tax credit required reconsideration after affording an opportunity to explain the reconciliation.

Analysis: The alleged ineligibility of input tax credit arose from mismatch-based discrepancies, and the asserted reconciliation between the relevant returns was central to the petitioner's defence. Since the reconciliation was stated to be capable of explaining the discrepancy, fairness required that the petitioner be permitted to demonstrate the same before the authority.

Conclusion: The matter was remitted for fresh consideration after granting an opportunity to explain the reconciliation.

Final Conclusion: The adjudication order was annulled and the dispute was sent back for reconsideration with opportunity to place the reconciliation materials before the authority.

Ratio Decidendi: Where a fiscal adjudication turns on a factual reconciliation affecting the alleged tax discrepancy, the authority must afford a fair opportunity to present and consider the reconciliation before deciding the matter.

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