Global Enterprises vs. The Deputy Assistant Commissioner(St)

Held

The Court held that while the 1st respondent had issued a show cause notice and afforded personal hearings, the petitioner's letter dated 04.02.2026 clearly indicated the availability of relevant records for verification. The Court found that in such circumstances, the petitioner should have been given one opportunity to produce these documents before finalizing the assessment. The failure to do so, despite the petitioner's specific assertion of record availability, amounted to a violation of the principles of natural justice. Additionally, the Court noted that similar proceedings for the tax period of 2021-22 concerning the same issue had been dropped, which weighed in favor of the petitioner. The Court also considered the ledger account details filed by the petitioner for the relevant tax period. Consequently, the Court set aside the impugned order. The Court imposed a condition that the petitioner must deposit 10% of the disputed tax within six weeks. Failure to comply would automatically dissolve the Court's order. Consequential actions, including bank attachments, were revoked, and the period from the impugned order's date to the receipt of the Court's order was excluded for limitation purposes.

Facts

The petitioner, Global Enterprises, a registered dealer under the GST Act, engaged in trading taxable and exempted goods, challenged an order passed by the 1st respondent, the Deputy Assistant Commissioner. The proceedings stemmed from a scrutiny of returns for the financial year 2024-25, where discrepancies were found regarding the restriction and reversal of Input Tax Credit (ITC) under Sections 42 and 43 of the GST Act. Initially, a notice in Form GST ASMT-10 was issued, followed by Form GST DRC-01A and a Show Cause Notice in Form GST DRC-01. The petitioner contended that it maintained separate records for taxable and exempted goods and availed ITC only on inputs used for taxable supplies. Despite the petitioner's reply and a letter stating records were available for verification, the 1st respondent passed an order dated 18.02.2026 demanding Rs.3,04,486/- towards tax, interest, and penalty.

Key Issues

1. Whether the impugned order dated 18.02.2026, passed by the 1st respondent, violates the principles of natural justice by failing to afford the petitioner a proper opportunity to produce relevant records for verification, despite the petitioner's specific request and the availability of such records? 2. Whether the impugned order is sustainable in light of previous proceedings for earlier tax periods (2021-22) concerning identical issues (reversal of ITC under Rules 42 and 43) where the department had dropped the proposals against the petitioner? Petitioner's Arguments: The petitioner argued that the 1st respondent violated principles of natural justice by not calling for and verifying the petitioner's purchase records and invoices, which were explicitly stated to be available. They relied on their letter dated 04.02.2026. Furthermore, the petitioner highlighted that for the earlier tax period of 2021-22, the 1st respondent had dropped similar proposals concerning the reversal of ITC under Rules 42 and 43 of the GST Rules, based on identical facts. They cited Ex.P9 and Conclusion Order (DRC 05) dated 05.01.2024 as evidence. Revenue's Arguments: The learned Assistant Government Pleader argued that the petitioner had an alternative remedy of appeal, and thus the writ petition was liable to be dismissed.