Calcutta High Court Remands GST Case for Fresh Adjudication Due to Disputed ITC Reversal and Revenue Neutrality

In a recent decision, the Calcutta High Court emphasized the importance of due process and fair hearing in indirect tax adjudication under the GST regime. The case arose from an ex parte order passed against a taxpayer who failed to respond to a show-cause notice (SCN) issued under the CGST Act. The assessee later challenged the order on the ground that the Input Tax Credit (ITC) in question had already been reversed through statutory filings, rendering the matter revenue neutral. Given the existence of a factual dispute over the reversal and the absence of proper adjudication, the High Court set aside the earlier orders and remanded the matter for fresh consideration by the adjudicating authority. This judgment reinforces the principles of natural justice in GST proceedings, especially where substantial compliance may negate any revenue loss to the exchequer.

🧾 Case Summary

Facts

• The Assistant Commissioner (CGST & Central Excise), Dinajpur Division (Raiganj, Uttar Dinajpur), issued a show‑cause notice via email to the appellant regarding wrongfully availed GST ITC.
• The appellant did not respond, leading to an ex parte adjudication order dated 14 December 2023, which held the appellant liable for reversal of ITC.
• The appellant appealed before the Additional Commissioner (Appeals) Siliguri, contending that ITC had already been reversed through GSTR‑3B filings for FY 2017–18, supplemented by a tabulated statement. The appellate authority noted that the August 2017 GSTR‑3B was missing and dismissed the appeal.

High Court Intervention

• The appellant filed a writ petition before the Calcutta High Court under Article 226, since a dedicated GST Appellate Tribunal was not yet constituted.
• On 13 June 2025, the Court granted interim relief, directing a 10% pre-deposit of the disputed amount.

Legal Issue

• The central question was whether the ITC had already been reversed (as reflected in the filings), which would render the matter revenue‑neutral, making any pre‑deposit unnecessary.

Decision & Outcome
The Division Bench (Chief Justice T. S. Sivagnanam & Justice Bivas Pattanayak) concluded:

1. It is a question of factual determination whether reversal occurred in full.
2. If so, the department suffered no loss—making the issue revenue‑neutral; interest was not levied by the adjudicating authority, further suggesting reversal.
3. The matter was remanded to the Assistant Commissioner to:
   • Treat the ex‑parte order (dated 14 Dec 2023) as a show‑cause notice;
   • Allow the appellant to file a detailed reply with supporting documents within 15 days;
   • Provide personal hearing;
   • Pass a fresh order per law.

📌 Key Takeaways

✅ Conclusion

This ruling emphasizes that where the taxpayer has possibly reversed ITC, making the demand revenue-neutral, the court will remand the issue for fresh adjudication, ensuring due process—especially when factual disputes persist regarding the reversal.