Facts of the Case:
In this case, the petitioner challenged an appellate order whereby the petitioner’s appeal against an assessment order issued under Section 73, was rejected. The proceedings originated from a show cause notice issued to the petitioner alleging excess availment of Input Tax Credit (ITC) on the ground that the petitioner’s supplier had not filed GSTR-3B returns for August 2019 to October 2019.
During adjudication, the supplier subsequently filed GSTR-3B returns for August and September 2019, leading the adjudicating authority to drop the demand for those months. However, as the return for October 2019 remained unfiled at that stage, the demand for that month was confirmed. The petitioner carried the matter in appeal. During the pendency of the appeal, the supplier also filed GSTR-3B for October 2019. Despite this, the appellate authority dismissed the appeal, not on the ground originally raised in the show cause notice, but by questioning the genuineness of the transactions and alleging lack of evidence regarding actual receipt of goods on the grounds never forming part of the original notice.
Aggrieved by the appellate order introducing new grounds without notice, the petitioner approached the High Court under Article 226 of the Constitution.
Issue:
Whether the appellate authority was justified in rejecting the appeal on grounds not mentioned in the show cause notice. Whether rejection of ITC on grounds not put to the assessee violates principles of natural justice and statutory safeguards under the GST law.
Held that:
The High Court held that the sole foundation of the proceedings under Section 73 was the allegation that the supplier had not filed GSTR-3B returns for the relevant period. Once the supplier filed returns for all the months, including October 2019 during the pendency of the appeal, there was no justification for the appellate authority to adopt a different standard from that applied by the adjudicating authority.
The Court observed that the appellate authority sought to reject the appeal by introducing entirely new grounds, such as questioning the genuineness of transactions and alleged non-receipt of goods, which were never part of the show cause notice. It reiterated the settled legal principle that no adjudication can travel beyond the confines of the notice to show cause, and any order based on extraneous grounds is legally unsustainable.
The Court further noted that this principle is statutorily embedded in Section 75(4) and the second proviso to Section 107(11) of the CGST Act, which mandate adherence to the grounds stated in the notice and observance of natural justice.
Since the appellate authority failed to grant the petitioner an opportunity to rebut the newly introduced grounds, the impugned order was held to be arbitrary and violative of natural justice.
Case Name: Parag Vinimay Pvt. Ltd. Versus Assitant Commissioner, State Tax, Bureau of Investigation, South Bengal (Head Quarters) & Ors. dated 03.01.2026
To read the complete judgement 2026 Taxo.online 290
