Natural Justice Restored: Assessment Order Set Aside for Failure to Consider Reconciliation Documents

Case Summary:

Case Title: ITI Limited v. Joint Commissioner, Central Tax & Central Excise
Court Name: High Court of Kerala at Ernakulam
Petition Number: W.A. No. 636 of 2025 (Arising from WP(C) No. 10993 of 2025)
Category of Dispute: Input Tax Credit – Reversal and Reclaim
Date of Judgement: 10th April 2025
Relevant Sections:

• Section 73 and 107 of CGST Act, 2017

• Section 20 of IGST Act, 2017

• Rule 37 of CGST Rules, 2017

🧾 Facts of the Case [Para 2-3]:

• The appellant, ITI Limited, a Central PSU, availed and reversed ITC on non-payment within 180 days and later reclaimed it during FY 2020–21 through GSTR-3B as per Rule 37.

• The Department noticed a mismatch between GSTR-3B and GSTR-2A and issued a show cause notice on 09.10.2024.

• During personal hearing, ITI Ltd. submitted detailed reconciliations, annexures, and written submissions [Para 3].

• The authority passed an order on 23.01.2025 demanding ₹3.28 crore in tax and ₹32.89 lakh in penalty, allegedly ignoring the reconciliation documents submitted [Para 2].

• The writ petition against this order was dismissed by Single Judge, directing the petitioner to pursue appellate remedy under Section 107 [Para 2].

❓Questions in Consideration [Para 2, 6]:

1. Whether the principles of natural justice were violated by the assessing officer in failing to consider reconciliation documents?

2. Can the High Court entertain the writ appeal despite availability of an alternate remedy under Section 107?

🔍Observation of the Court [Para 6-8]:

• The Court found the appellant’s claim substantiated that the documents were indeed submitted and that the officer did not consider them [Para 6].

• The officer’s affidavit admitted inability to reconcile the ITC reversal and reclaim data with the GST portal, revealing lack of due diligence [Para 6].

• The Court held that if reconciliation was doubted, an opportunity should have been given to the appellant to clarify the same [Para 7].

• Denial of such opportunity amounted to violation of natural justice, making the original order unsustainable [Para 8].

⚖️ Judgement of the Court [Para 9]:

• The writ appeal was allowed, and the impugned order (Ext.P4) was set aside.

• The department was directed to fix a fresh hearing within two weeks and provide an opportunity to the appellant to reconcile ITC claims with GST portal data.

• The authority must then pass a fresh order after considering all documents and submissions in accordance with law [Para 9].

🧵 Between Fine Lines:

• Ignoring reconciliation documents submitted in a tax dispute breaches natural justice.

• Even when alternate remedy exists, writ may be entertained where due process is overlooked.

• Authorities must allow clarification if documents seem mismatched with GST portal data.

• A PSU taxpayer’s compliance with Rule 37 was ignored without justification.

• Assessment orders lacking proper reasoning and consideration of materials are unsustainable.

📚 Summary of Referred Cases:

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