Natural justice barred rejection of transitional credit where the reply period had not expired, leading to remand

An order partly rejecting transitional credit was quashed because it was passed before the time allowed for replying to the show-cause notice had expired, depriving the taxpayer of an effective opportunity to present documents and meet the case against it. The court held that denial of a substantial portion of transitional credit without a proper hearing violated natural justice. The matter was remitted for fresh decision on merits after affording the taxpayer a hearing and considering the supporting material.

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Issues: Whether the order partly rejecting the petitioner's claim for transitional credit was liable to be quashed for violation of the principles of natural justice and whether the matter required remand for fresh consideration.

Analysis: The petitioner had filed a revised TRAN-1 pursuant to the Supreme Court directions, and the Department thereafter called for documents and issued a show-cause notice granting time to reply. The impugned order was nevertheless passed before the expiry of the time allowed for reply. This deprived the petitioner of an effective opportunity to meet the notice and to place supporting documents. Since the denial of a substantial portion of transitional credit was made without affording a proper hearing, the order could not be sustained.

Conclusion: The impugned order was quashed and the matter was remitted to the respondents for fresh decision on merits after hearing the petitioner.

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