The Calcutta High Court in the case of Hemraj Rice Mill & Anr. Vs. The Assistant Commissioner, CGST & CX, Bardhaman Division, Bardhaman & Ors. vide Case No.- WPA 3159 of 2025 dated 16.06.2025, reinforces the principle that compliance with procedural rules is as critical as substantive tax liability. The authorities must adhere to the structure and safeguards provided under the law and not proceed mechanically. ITC reversal must follow the precise formula and steps outlined in the rules; arbitrary estimation is not legally sustainable.
Facts of the Case: The petitioner challenged the appellate order dated 11.11.2024 passed u/s 107 and the corresponding demand in Form GST APL-04 dated 12.11.2024, for the tax periods 2017–18 to 2018–19. The Authorities concluded that the petitioner had failed to reverse Input Tax Credit as required under Section 17(2) of the Act read with Rules 42 and 43, amounting to ₹55,11,115. The adjudicating authority allegedly did not apply the statutory formulae under Rules 42 and 43 while determining the disallowance. Though the appellate authority acknowledged this procedural lapse, it dismissed the appeal on the ground that the petitioner failed to furnish a reconciliation statement for the period.
Issue: Whether the adjudication and appellate orders denying ITC were sustainable in law despite failure to apply the prescribed computational methodology under Rules 42 and 43, and allow the petitioner an opportunity to submit reconciliation statements before concluding.
Held that: The Court observed that the appellate authority acknowledged the adjudicating authority’s failure to apply the formulae under Rules 42 and 43, but still dismissed the appeal without giving the petitioner an opportunity to submit reconciliation documents.
The Court held that the appellate authority should have called for the reconciliation statements from the petitioner to ensure a just determination, as allowed under Section 107(12) of the Act.
Instead of remanding the case to the appellate authority, the Court remanded the matter to the adjudicating authority, with a direction to provide a proper opportunity of hearing to the petitioner.
The petitioner was granted liberty to submit reconciliation statements for the relevant assessment years to assist in the correct computation of ITC and its reversal.
The Court quashed and set aside the order of Adjudicating authority, Appellate Authority and demand raised in FORM GST DRC-07.
To read the complete judgment 2025 Taxo.online 1186
