The Sikkim High Court has held that authorities administering the GST Budgetary Support Scheme cannot deny benefits solely on the basis of an apparent discrepancy in a declaration without first providing the claimant an opportunity to explain the inconsistency.
The bench of Chief Justice A. Muhamed Mustaque set aside the impugned order to the extent challenged and directed the authorities to reconsider the claim after granting a fair hearing.
A writ petition filed by a pharmaceutical manufacturer operating industrial units in Sikkim. The dispute arose from the company’s claim for budgetary support under the special GST-era incentive scheme introduced for eligible industrial units located in Jammu & Kashmir, Uttarakhand, Himachal Pradesh, and North Eastern States, including Sikkim.
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The petitioner had submitted an application in September 2019 seeking budgetary support for its Sikkim unit. In its declaration, the company claimed Input Tax Credit (ITC) of approximately ₹15.28 crore for the eligible unit. Subsequently, the GST authorities directed the company to furnish a Chartered Accountant’s certificate to substantiate the claim. The CA certificate, however, reflected that the actual ITC availed amounted to approximately ₹10.01 crore.
Despite the existence of this discrepancy, the authorities finalized the proceedings through an order dated January 19, 2023 without considering the CA certificate or granting the company an opportunity to explain the variation. Instead, the order proceeded on the basis of the higher figure contained in the original declaration.
The company argued that the higher amount mentioned in the declaration was a genuine mistake and that the actual eligible ITC was the lower figure certified by the Chartered Accountant. According to the petitioner, this resulted in an unjust deduction of approximately ₹5.27 crore from its entitlement under the budgetary support scheme.
The High Court had already noted the grievance that no personal hearing had been granted before the authorities finalized the claim. Consequently, the Court directed the concerned GST authority to afford a personal hearing and verify the petitioner’s claims regarding entitlement and alleged errors in the declaration.
Following the hearing, the authority passed a fresh order in April 2026 but declined to consider the petitioner’s objections. The authority reasoned that the scheme contained no provision permitting post-facto revision or substitution of figures after filing, particularly where such revision would alter the amount of benefit claimed.
The High Court disagreed with the authority’s reasoning and observed that the issue was not merely one of rectification after conclusion of proceedings. Instead, the Court emphasized that the proceedings themselves were flawed because they had been concluded without addressing an obvious discrepancy between the declaration and the CA certificate.
The Court noted that the CA certificate had been furnished pursuant to the authorities’ own directions. Therefore, once such a discrepancy became apparent on record, the authorities were under an obligation to seek clarification before reaching a conclusion.
According to the Court, even though a claimant would ordinarily be bound by the contents of its declaration, that principle cannot be treated as an inflexible rule where the claimant alleges a genuine mistake and seeks an opportunity to substantiate the explanation with supporting documents.
The Court stated that a mere human error in a declaration cannot automatically be used against a claimant without first allowing an explanation.
The Court reasoned that if the situation had been reversed—where the declaration disclosed a lower figure and the CA certificate reflected a higher amount—the authorities themselves would likely have sought clarification. Therefore, fairness demanded that the same approach be adopted when the discrepancy operated against the claimant.
The Court clarified that it was not deciding whether the petitioner’s explanation was ultimately correct. Rather, the issue before the Court was whether the petitioner should have been given an opportunity to explain the discrepancy before the claim was finalized. The Court answered that question unequivocally in the affirmative.
Emphasizing that fairness is the hallmark of administrative proceedings, the Court held that when a discrepancy is evident on the face of the record, the concerned officer must call upon the applicant to explain it. Only after considering the explanation can the authority arrive at a conclusion on merits. Proceedings cannot be finalized merely by relying upon one document while ignoring another document that was produced at the authority’s own instance.
The Court concluded that the defect went to the root of the proceedings because the claim had been decided without affording a reasonable opportunity to explain the discrepancy. As a result, the impugned order could not be sustained.
The High Court set aside the impugned order to the extent challenged and granted liberty to the petitioner to produce all relevant documents to establish that the discrepancy in the declaration was the result of an error.
The Court directed the concerned GST authorities to comply with its directions within eight weeks and reconsider the matter after providing the petitioner an adequate opportunity to substantiate its claim.
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