GST ITC Demand Set Aside for Denial of Fair Hearing

Case Details: Pidilite Industries Ltd. vs. Union of India - [2026] 184 taxmann.com 456 (Bombay)

Judiciary and Counsel Details

G. S. Kulkarni & Aarti Sathe, JJ.
Prakash Shah, Sr. Adv. & Mohit Raval, PDS Legal for the Petitioner.
Ms Jyoti Chavan, Additional Govt. Pleader, Ms Sheetal Malvankar, AGP, Ms Maya Majumdar & Ms Megha Bajoria for the Respondent.

Facts of the Case

The petitioner, a manufacturer of chemical products, duly registered under GST, claimed transitional input tax credit (ITC) through TRAN-1 and TRAN-2 forms. Pursuant to an audit of such transition, a show cause notice (SCN) was issued proposing recovery of ITC along with interest and penalty. It submitted its reply and was granted a hearing; however, it specifically requested copies of verification reports prepared by the authorities in respect of invoice validation. Despite such requests, the verification reports were not furnished. The impugned order nevertheless confirmed the demand and penalty, citing incomplete invoice verification and column-wise discrepancies in the TRAN forms. It was contended that denial of access to relied-upon documents and incomplete verification of invoices vitiated the proceedings as being contrary to principles of natural justice. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the furnishing of verification reports relied upon by the adjudicating authority was imperative to ensure compliance with principles of natural justice. It observed that denial of such documents, despite specific requests, effectively deprived the petitioner of a meaningful opportunity to contest the allegations. It was held that the adjudication was conducted without complete verification of invoices and without granting adequate opportunity for rectification of discrepancies. It emphasised that a fair hearing necessarily includes access to all material relied upon by the authority in reaching its conclusions. Accordingly, the impugned order was quashed, and the matter was remanded for de novo consideration with directions to furnish the verification reports.