The Bombay High Court has set aside a GST adjudication order after finding that the adjudicating authority failed to consider the taxpayer’s detailed year-wise and HSN-wise reconciliation of turnover submitted in response to a show cause notice.

The Bench of Justice M.S. Karnik and Justice Sandesh D. Patil observed that the adjudicating authority recorded that the taxpayer had not produced a reconciled set of documents, although such reconciliation had been specifically furnished with the reply to the show cause notice.

The petitioner was issued a show cause notice dated September 29, 2025, under Section 74 of the Central Goods and Services Tax Act, 2017, covering the period from 2020 to 2023.

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Section 74, as applicable to the disputed period, dealt with the determination of tax allegedly not paid, short-paid or erroneously refunded, or input tax credit allegedly wrongly availed or utilised, by reason of fraud, wilful misstatement or suppression of facts.

In its reply, the petitioner raised a preliminary objection to the invocation of Section 74 and requested that the notice be dropped.. It contended that, if proceedings were considered necessary, they should be initiated under Section 73 of the CGST Act instead.

Apart from contesting the legal basis of the notice, the petitioner submitted several documents in support of its case. These included a detailed year-wise reconciliation of turnover according to Harmonised System of Nomenclature classifications for the financial years 2019-20, 2020-21, 2021-22 and 2022-23.

The reply also contained references to the year-wise calculations relied upon by the taxpayer to explain the correctness of the tax liability discharged.

Despite these submissions, the adjudicating authority concluded that the taxpayer had failed to provide a complete, authenticated and reconciled set of documents during either the investigation or the adjudication proceedings.

The authority stated that the taxpayer had contested the allegation of non-submission of documents and claimed that relevant details had been furnished through emails on various dates.

It nevertheless held that the material produced consisted only of partial documents or uncorrelated data and could not be treated as sufficient compliance. On that basis, the department relied upon the information available on the GST portal to determine the taxpayer’s liability.

The adjudicating authority specifically observed that the absence of verifiable and complete records prevented the taxpayer from establishing the correctness of the tax liability discharged.

After examining the record, the High Court found a direct inconsistency between the reasoning recorded in the adjudication order and the documents submitted by the petitioner.

The Bench noted that the petitioner’s reply to the show cause notice contained a detailed year-wise reconciliation of turnover on an HSN-wise basis for the relevant period.

The Court held that the impugned order had been passed without considering this reconciliation. It found this omission significant because the adjudicating authority itself had acknowledged that a reconciled set of documents could establish the correctness of the tax liability discharged.

The High Court observed: “The impugned order has been passed without considering the detailed year wise reconciliation submitted by the Petitioner and therefore the order cannot be sustained.”

The Bench further noted that the very documents which, according to the adjudicating authority, could have established the correctness of the discharged tax liability had been ignored while passing the order.

The High Court set aside the impugned order and remanded the proceedings to the adjudicating authority for a fresh decision on the show cause notice in accordance with law.

The petitioner was directed to appear before the adjudicating authority on September 3, 2026, at 11 a.m. The authority was permitted to fix a further hearing schedule at its convenience and was directed to decide the show cause notice expeditiously.

The Court ordered that a fresh adjudication order must be passed only after hearing the petitioner. It also clarified that the adjudicating authority would be free to seek any additional clarification considered necessary.

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