ITC Reversal Already Done – Order Quashed for Lack of Jurisdiction

Case Summary

Case Title: Sharda Construction Through Shaileshkumar Dahyabhai Patel vs State of Gujarat & Ors.
Court: Gujarat High Court
Petition No.: Special Civil Application No. 15204 of 2024
Date of Judgement: 08 May 2025
Category: Input Tax Credit (ITC) – Reversal on Exempt Supplies
Relevant Sections: Section 73, Section 107(4) of CGST Act; Rules 42 & 43 of CGST Rules
Coram: Hon’ble Mr. Justice Bhargav D. Karia and Hon’ble Mr. Justice P. M. Raval

Facts of the Case (¶4.1 to ¶4.9)

• The petitioner, a GST-registered construction firm, had already reversed ITC attributable to exempt supplies (units sold post-completion certificate) on 19.10.2018 for FY 2017–18 and FY 2018–19 as shown in GSTR-3B, GSTR-9, and GSTR-9C filings (¶4.6).

• Due to deactivation of the registered email ID (¶4.2), the petitioner missed the SCN uploaded on the portal on 27.09.2023 and did not reply (¶4.7).

• Consequently, an ex-parte adjudication order dated 22.12.2023 was passed alleging non-reversal of ITC (¶4.7).

• The petitioner only came to know of the order on 03.05.2024 via a department call and physical copy served manually on 06.05.2024 (¶4.8).

• An appeal filed on 06.05.2024 was dismissed on 21.06.2024 as time-barred under Section 107(4) of CGST Act (¶4.9).

Questions in Consideration

1. Whether the adjudication order dated 22.12.2023 was sustainable despite prior ITC reversal (¶5.2)?

2. Whether the petitioner was denied a reasonable opportunity to be heard (¶5.5)?

3. Whether appellate rejection on limitation under Section 107(4) justified interference under Article 227 (¶7)?

Observation of Court

• The Court noted that the petitioner had indeed reversed ITC for FY 2017–18 on 19.10.2018, which was also disclosed in GSTR filings (¶5.1–¶5.3).

• The SCN and adjudication order were only uploaded on the portal, without proper intimation, and the petitioner was unaware due to email deactivation (¶5.5, ¶7).

• The appellate authority had no power to condone the delay under Section 107(4), thereby necessitating intervention under Article 227 (¶7).

• The department did not dispute the actual reversal but sought reconciliation not presented during original adjudication (¶8).

Judgement of the Court

• The High Court quashed the adjudication order dated 22.12.2023 as being without jurisdiction since ITC had already been reversed (¶9).

• Matter remanded to the adjudicating authority to verify the petitioner’s claims and pass a fresh de novo order within 12 weeks (¶9).

• Petition allowed to the above extent with no costs (¶9).

Between Fine Lines

• The Court emphasized substance over form—actual reversal of ITC mattered more than portal procedural defaults.

• Delay due to lack of email access did not warrant penal consequences.

• Section 107(4)’s limitation cannot curtail judicial review.

• Taxpayers must monitor portal activity, but authorities must also ensure due communication.

• Remand was a balanced remedy ensuring both procedural justice and substantive verification.

Summary of Referred Cases

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