The Calcutta High Court has reiterated that a taxpayer cannot be denied the statutory right of personal hearing where an adverse GST order is contemplated. Holding that the principles of natural justice under Section 75(4) of the GST Act were violated, the Court set aside the appellate order as well as the underlying show cause proceedings and remanded the matter to the appellate authority for a fresh decision on merits. 

The bench of Justice Raja Basu Chowdhury also took note of the retrospective insertion of Section 16(5), observing that the amendment substantially diluted the basis of the Input Tax Credit (ITC) demand raised against the assessee. 

The petitioner challenged an appellate order dated December 31, 2025, which had dismissed its appeal against an adjudication order passed under Section 73 of the West Bengal GST/CGST Act for the tax period from April 1, 2019 to March 31, 2020. The adjudication order had been passed on August 21, 2024 pursuant to a Show Cause Notice issued in Form GST DRC-01. 

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The taxpayer argued that despite the show cause notice contemplating an adverse decision, no opportunity of personal hearing had been granted as mandated under Section 75(4) of the GST Act. It further explained that the appeal had been filed belatedly because its tax consultant had left employment and, more importantly, the adjudication order had been uploaded on the GST portal under the “View Additional Notices and Orders” tab instead of the usual “View Notices and Orders” section, preventing the company from noticing the order in time. The resulting delay of 206 days was explained before the appellate authority, which nevertheless refused to condone the delay on the ground that it lacked statutory power to do so. 

The petitioner also contended that the principal demand against it arose from denial of Input Tax Credit under Section 16(4) of the GST Act. However, after the Finance (No. 2) Act, 2024 inserted Section 16(5) with retrospective effect from July 1, 2017, taxpayers who had furnished returns before the prescribed cut-off date of November 30, 2021 became eligible for relief. Since the company’s returns had been filed before the cut-off date, it argued that the very foundation of the ITC demand no longer survived. 

The State opposed the petition by arguing that the taxpayer had not raised the issue of violation of natural justice before the appellate authority. It further submitted that the issues relating to Section 16(5) involved factual determination, which ordinarily ought not to be examined in writ jurisdiction. The State also pointed out that the GST Appellate Tribunal had by then become functional, providing the petitioner with an alternate statutory remedy. 

Justice Raja Basu Chowdhury observed that the show cause notice clearly contemplated an adverse order, making it obligatory for the adjudicating authority to grant the taxpayer an opportunity of personal hearing under Section 75(4). The Court found that admittedly no such hearing had been provided, amounting to a violation of the statutory requirement as well as the principles of natural justice. 

The High Court also accepted the taxpayer’s explanation regarding delayed filing of the appeal. It noted that although Section 169 of the GST Act recognizes service through the common portal, the adjudication order had been uploaded under the “View Additional Notices and Orders” tab instead of the standard “View Notices and Orders” section.

The Court observed that taxpayers ordinarily expect adjudication orders to appear under the regular notices tab. Therefore, the explanation that the petitioner remained unaware of the order due to its placement in an unusual section of the portal appeared to be entirely plausible. 

The Court further observed that a substantial portion of the GST demand was founded upon reversal of ITC under Section 16(4), whose rigour had since been significantly relaxed through the insertion of Section 16(5).

Rejecting the State’s argument that factual issues prevented interference, the Court held that where the dates of filing returns were undisputed, it would not be difficult to ascertain whether the taxpayer satisfied the conditions prescribed under Section 16(5). Nevertheless, considering the three-tier adjudicatory framework under the GST law, the Court considered it appropriate to remand the matter instead of deciding the issue itself. 

Accordingly, the High Court set aside the appellate order dated December 31, 2025 along with the impugned show cause proceedings and remanded the matter to the appellate authority for fresh adjudication on merits in accordance with law.

The Court directed the appellate authority to dispose of the appeal expeditiously, preferably within three months from the date of communication of the High Court’s order. 

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