M/S Padmavathi Associates vs. The Commercial Tax Officer

Held

The Court allowed the petition in part. It quashed the Adjudication Order dated 29.02.2024 (Annexure-N) and the Recovery Notice dated 03.08.2026 (Annexure-C). The Court directed the petitioner to appear before the respondent on 30.11.2026, without further notice, and reserved the petitioner's liberty to file a certified copy of the order along with documents justifying its claim as genuine transactions. The first respondent was directed to consider the petitioner's reply and documents in light of the Court's observations. The Court noted the discrepancy between the initial intimation of excess ITC (Rs. 7,35,894/-) and the final demand (Rs. 1,30,148/-) and emphasized that the respondent should consider the petitioner's response and documents in this context. The ratio decidendi is that procedural fairness requires an opportunity to be heard, especially when personal exigencies and significant discrepancies in demand notices are involved, and that the authorities must provide clear reasoning for their conclusions.

Facts

The petitioner, M/s Padmavathi Associates, a partnership firm, filed a writ petition challenging an Adjudication Order dated February 29, 2024, and a Recovery Notice dated August 3, 2026, both issued by the Commercial Tax Officer. The petitioner contended that due to compelling personal circumstances, including the loss of close family members between June and October 2024, they were unable to verify the Intimation and Notice uploaded on the GST portal. The proceedings were initiated due to an alleged mismatch between Form GSTR-3B and Form GSTR-2A for the tax period 2018-19. The petitioner also noted a discrepancy between the amount demanded in the Intimation (Form GST DRC-01A) of Rs. 7,35,894/- and the Adjudication Order of Rs. 1,30,148/-.

Key Issues

1. Whether the Adjudication Order dated 29.02.2024 and the Recovery Notice dated 03.08.2026, passed under Section 73 and Section 79 of the KGST Act, 2017 respectively, are liable to be quashed due to the petitioner not being afforded a reasonable opportunity to file a reply to the Show Cause Notice dated 20.12.2023, in light of the petitioner's personal circumstances and alleged procedural irregularities. Petitioner's Arguments: - The petitioner claims bonafide entitlement to Input Tax Credit (ITC) and can produce documents to prove the genuineness of transactions for the tax period 2018-19. - A Circular exists that allows recipients of supply to produce documents to justify transactions despite shortfalls between Form GSTR-3B and Form GSTR-2A. - There is a significant difference between the amount indicated in the Intimation (Form GST DRC-01A) and the final Adjudication Order, with neither order providing a clear reasoning for this discrepancy. - Compelling personal circumstances prevented the petitioner from responding to the Show Cause Notice. Revenue's Arguments: - The judgment records that the learned High Court Government Pleader accepted notice for the respondents, but no specific arguments were recorded for the revenue.