Facts of the Case:

In this case, the adjudication proceedings arose from a show cause notice alleging short payment of output tax and excess availment of Input Tax Credit (ITC), particularly in respect of IGST paid on import of goods, as well as wrongful availment of ITC attributable to suppliers who had allegedly failed to file their returns.

The petitioners submitted a detailed reply to the show cause notice. However, the adjudicating authority held them liable on several counts, including excess ITC on imports, primarily on the ground that certified proof of payment of IGST from the Customs Department was not produced. The adjudication order was carried in appeal, but the appellate authority confirmed the order in its entirety. The appellate order was passed ex-parte, as the petitioners could not appear at the hearing.

Before the High Court, the petitioners confined their challenge to two issues denial of ITC on import of goods due to alleged non-payment / non-proof of IGST, and reversal of ITC solely on account of non-filing of returns by suppliers.

Issue:

Whether denial of ITC on import of goods was justified when IGST had in fact been paid, but the same did not initially reflect in the GST portal due to procedural and system-related limitations at the Customs end. Whether the petitioners could be permitted to contest reversal of ITC attributable to suppliers’ failure to file returns, despite having missed the opportunity of hearing before the appellate authority.

Held that:

The High Court held that the reports filed by the Customs Authorities clearly demonstrated that the alleged excess availment of ITC on import of goods was not on account of non-payment of IGST by the petitioners, but due to procedural deficiencies arising from manual filing and processing of Bills of Entry and delayed system integration with the GST portal. Since this crucial factual aspect was not available before the adjudicating or appellate authority, the appellate order, insofar as it related to excess ITC on import of goods, could not be sustained.

Accordingly, the Court set aside the appellate authority’s findings on the issue of excess ITC on import of goods and remanded the matter to the appellate authority for fresh consideration in the light of the Customs reports.

As regards the second issue relating to reversal of ITC due to non-filing of returns by suppliers, the Court noted that although principles of natural justice would ordinarily warrant an opportunity of hearing, the petitioners had failed to satisfactorily explain their non-appearance before the appellate authority despite opportunity being granted.

Case Name: M/s. Amar Iron Udyog Pvt. Ltd. & Anr. Versus Union of India & Ors. dated 13.01.2026

To read the complete judgement 2026 Taxo.online 70