Procedural Lapses in Customs Systems Can’t Lead to Reversal of Import ITC: Calcutta High Court

The Calcutta High Court has remanded a GST dispute involving alleged excess availment of Input Tax Credit (ITC) on imported goods back to the appellate authority after customs department clarified that the non-reflection of IGST in the GST portal was due to procedural limitations arising from manual processing of Bills of Entry, and not non-payment of tax. The bench of Justice Om Narayan Rai while taking note of the customs reports, observed that these developments threw “sufficient light” on the issue which had not been available before the adjudicating and appellate authorities earlier. Consequently, set aside the appellate authority’s observations relating to excess availment of ITC on import of goods and remanded the matter for fresh consideration in light of the customs reports. The case arose from a writ petition challenging an appellate order passed under Section 107 of the West Bengal GST Act, 2017 / CGST Act, 2017, which had upheld an adjudication order confirming tax demands, interest, and penalties under Section 73 of the Act The GST department had issued a show cause notice alleging short payment of output tax and excess availment of ITC on the import of goods. It was specifically alleged that IGST paid at the time of import was not reflected in the GST portal, leading to the conclusion that ITC had been wrongly availed. An adjudication order dated April 30, 2024 held the taxpayer liable on multiple counts, including excess ITC on imports. This order was affirmed in appeal; however, the appellate authority passed the order ex parte, without the taxpayer being heard. Aggrieved by the appellate order, the taxpayer approached the Calcutta High Court. Before the High Court, the petitioner restricted its challenge to two issues. Firstly, alleged excess availment of ITC on imported goods due to non-reflection of IGST. Secondly, direction to reverse ITC on the ground that suppliers had failed to file GST returns. The petitioner argued that IGST had in fact been paid at the time of import and that certified copies from customs could not be produced earlier due to procedural difficulties. It was also contended that ITC cannot be reversed merely because suppliers failed to file returns. The High Court directed customs authorities to file a report regarding eight specific Bills of Entry that were the subject matter of adjudication. In an affidavit filed on January 7, 2026, customs authorities clarified that the Bills of Entry were processed manually, and although goods were cleared and “Out of Charge” was granted, the same was not captured in the ICES/EDI system at the relevant time. As a result, IGST details were not transmitted to the GST portal, leading to the mismatch The affidavit further stated that this non-reflection was purely procedural and not due to non-payment of IGST. Upon subsequent verification, “Out of Charge” had already been post-facto entered in the ICES system for five Bills of Entry. An additional report confirmed that, after verification, details relating to all eight Bills of Entry were now reflecting correctly on the GST portal. The Court permitted the taxpayer to place the customs reports before the appellate authority, which was directed to take an independent decision in accordance with law. On the second issue—reversal of ITC due to non-filing of returns by suppliers—the Court observed that although the taxpayer missed the opportunity of being heard earlier, the appellate authority could reconsider the issue in the interest of justice. However, this relief was made conditional. The Court directed that the issue could be reconsidered only if the taxpayer pays costs of ₹15,000 to the High Court Legal Services Committee, Calcutta within two weeks and furnishes proof of such payment before the appellate authority. The High Court clarified that it had not examined the merits of the tax dispute and that the appellate authority must independently adjudicate the matter strictly in accordance with law, uninfluenced by any observations of the Court. Case Details Case Title: M/s. Amar Iron Udyog Pvt. Ltd. & Anr. Vs Union of India & Ors. Case No.: WPA19648 of 2025 with CAN 1 of 2025 Date: 13.01.26 Counsel For Petitioner: Arijit Chakraborty Counsel For Respondent: Anjan Chakraborty Click Here To Read Order Read More: ‘Reason to Believe’ Need Not Be Detailed in Seizure Memo: Calcutta HC Upholds Betel Nuts Seizure

Procedural Lapses in Customs Systems Can’t Lead to Reversal of Import ITC: Calcutta High Court

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