Case Details
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Case Title: Hemraj Rice Mill & Anr. v. The Assistant Commissioner, CGST & CX, Bardhaman Division & Ors.
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Court: Calcutta High Court
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Petition No.: WPA 3159 of 2025
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Judgment Date: 16 June 2025
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Relevant Sections: Section 107, Section 17(2) CGST/WBGST Act, 2017; Rules 42 & 43 CGST/WBGST Rules, 2017
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Category of Dispute: Input Tax Credit (ITC) – reversal of credit
Facts (para 1–4)
The petitioners challenged the order dated 11 November 2024 passed under Section 107 of the CGST/WBGST Act, along with demand in Form GST APL-04 for the tax period 2017–18 and 2018–19. The authorities alleged that ITC reversal under Section 17(2) read with Rules 42 and 43 amounting to ₹55,11,115 was not made. Though the petitioners contested, the adjudicating authority determined liability without applying the computation formula prescribed in the Rules. On appeal, the authority admitted that Rule 42 and 43 procedures were not followed but rejected the appeal on the ground that the petitioner had failed to submit reconciliation of ITC availed versus purchases made.
Questions before Court
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Whether the adjudicating and appellate authorities erred in ignoring the mandatory formula under Rules 42 and 43 while reversing ITC.
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Whether the appellate authority, having acknowledged procedural lapses, was bound to call for reconciliation before confirming demand.
Observations (para 5–7)
The Court noted that once the appellate authority found that Rule 42 and 43 procedures were ignored, it was duty-bound to cure the defect. Instead of summarily dismissing the appeal, it ought to have directed the petitioner to provide reconciliation under Section 107(12). The Court held that both authorities erred – the adjudicating authority by skipping the prescribed method, and the appellate authority by failing to exercise its powers to seek reconciliation. However, as the petitioner too had contributed by not furnishing reconciliation in time, the Court considered remand appropriate.
Judgment (para 7–10)
The High Court set aside the adjudicating order (27 December 2023), the appellate order (11 November 2024), and the determination in Form GST DRC-07 (3 January 2024). The matter was remanded to the adjudicating authority for fresh decision in accordance with law, after affording an opportunity to the petitioner to file reconciliation statements and to be heard.
Cases Referred – Summary Table
| Case | Verdict / Principle |
|---|---|
| Hemraj Rice Mill (present case) | Orders of adjudicating and appellate authority set aside; matter remanded since Rules 42 & 43 procedure ignored and reconciliation not sought. |
(No external precedents cited; only present case applied statutory interpretation.)
Between Fine Lines
For industry, the case underlines that ITC reversals under Section 17(2) must strictly follow Rules 42 and 43, which lay down formulae for proportionate reversal of common credits. Authorities cannot bypass these steps, nor can they confirm demand without calling for reconciliation statements if not furnished. Businesses must ensure timely reconciliation of purchases and ITC to avoid disputes, but they also gain protection that demand cannot be upheld mechanically without Rule-based computation.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
