M/S Kumaon Rosin Industries vs. Commissioner SGST

Held

The Court held that the impugned order is vitiated due to a violation of statutory provisions and principles of natural justice. Firstly, the Court found that service of notice solely through the GST portal was insufficient after the petitioner's registration was cancelled, as no physical or alternative statutory service under Section 169 was effected. This deprived the petitioner of effective communication and the opportunity to defend itself. Secondly, the Court noted that Section 75(4) mandates a personal hearing before passing an adverse order, and this was not granted, which is fatal to the proceedings. The adjudicating authority failed to consider the petitioner's evidence regarding the supplier's error and the relevant CBIC circular. Thirdly, the Court determined that the writ petition was maintainable because, at the time the impugned order was passed, the appellate remedy under Section 107 was effectively unavailable due to a High Court judgment that held orders of the Assistant Commissioner non-appealable. By the time this position was clarified, the limitation period for appeal had lapsed, rendering the remedy illusory. The Court quashed the impugned order and remanded the matter back to the authority for fresh adjudication, directing proper service of notice, consideration of evidence, and mandatory grant of a personal hearing. The merits of the ITC claim were left open for fresh adjudication.

Facts

The petitioner, M/s Kumaon Rosin Industries, had its GST registration cancelled effective November 30, 2017. On January 27, 2023, the respondent authorities uploaded an intimation (DRC-01A) on the GST portal alleging excess input tax credit (ITC) claim for July 2017 to March 2018. Subsequently, on August 22, 2023, a Show Cause Notice (SCN) (DRC-01) was issued, proposing to disallow ITC of ₹1,52,994.12 due to a GSTR-3B and GSTR-2A mismatch, and to levy interest and penalty. No physical copy of the notice was served. The Assistant Commissioner passed an order-in-original on November 4, 2023, confirming the demand without affording a personal hearing. The petitioner claimed it was unaware of the proceedings as it did not access the portal post-cancellation and no statutory service was effected. The mismatch was attributed to a supplier's error, with supporting certificates obtained as per CBIC Circular No. 183/15/2022. The petitioner also argued that the appellate remedy was initially unavailable due to a High Court judgment, and by the time it was clarified, the limitation period had expired.

Key Issues

1. Whether the proceedings culminating in the impugned order are vitiated for violation of the principles of natural justice, specifically concerning the service of notice and the grant of a personal hearing, under Section 169 and Section 75(4) of the CGST/UKGST Act? 2. Whether the Petitioner is entitled to avail ITC despite the mismatch between GSTR-3B and GSTR-2A, considering the supplier's error and the CBIC Circular No. 183/15/2022? 3. Whether the writ petition is maintainable in light of the availability of an appellate remedy under Section 107 of the CGST Act? Petitioner's arguments: The proceedings are vitiated due to improper service of notice, as only portal uploads were made after registration cancellation, and no physical or alternative statutory service under Section 169 was effected. Section 75(4) mandates a personal hearing, which was not provided, leading to a mechanical order. The ITC mismatch was due to a supplier's error, rectifiable as per Circular No. 183/15/2022. The appellate remedy was initially unavailable due to a High Court judgment, and by the time it was clarified, the limitation period had lapsed, making the writ petition maintainable. Respondent's arguments: Proceedings were validly conducted under Section 73, with notice served via the GST portal as per Section 169(1)(d). The Petitioner claimed excess ITC, and the burden of proof rests on the claimant; third-party certificates are insufficient. The writ petition is not maintainable due to the statutory appellate remedy under Section 107.