BackgroundAn Assessment Order dated 20th December 2023 was passed against the Petitioner under Section 73 of the TNGST Act 2017. Within the stipulated time, the Petitioner filed a Rectification Application under Section 161 seeking rectification of errors apparent on the face of the record in the Assessment Order. The first Respondent, without assigning any reasons as to why the Assessment Order did not suffer from any apparent error and without giving any opportunity of hearing, rejected the Rectification Application vide order dated 02nd February 2024. The Rectification Order merely extracted tables of figures indicating the amounts the petitioner was liable to pay — without any reasoning or analysis. The Petitioner challenged both the Assessment Order and the Rectification Order before the High Court under Article 226 of the Constitution.Relevant Facts & Rival ContentionsThe Petitioner contended that the Rectification Application was rejected without hearing and without assigning reasons as to how the Assessment Order was free from apparent errors — a clear violation of the third proviso to Section 161. The Revenue, however, vehemently argued a narrow construction — that no reasons need to be given when rejecting a rectification application, as the authority only needs to check for apparent error and can reject without reasons if none exists. More importantly, the Revenue contended that the hearing requirement under the third proviso to Section 161 arises ONLY when the Assessing Officer initiates rectification suo motu and the resulting order is detrimental to the assessee — and NOT when the rectification application had been made at the instance of the assessee himself. The Revenue further argued that the petitioner had not even indicated any apparent error in his application, and therefore no interference was warranted.Third Proviso to Section 161 — The Pivotal Statutory Text:"Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification."Revenue's ArgumentProviso applies only to suo motu rectification adverse to assessee — NOT to rejection of assessee-initiated applicationCourt's RulingProviso applies to BOTH situations — even rejection of assessee-initiated application requires hearing and reasons Court Observations (Verbatim)"A perusal of the order does not also indicate that there had been no error apparent on the record to reject the rectification. He had only extracted the tables indicating the figures which the petitioner is liable to pay. There is also no reasonings as to why there is no error apparent on the face of the record. For this reason, the impugned order dated 02.02.2024 is liable to be set aside."— Para 8 (on the mechanical nature of the Rectification Order)"Even though, streneous efforts had been made by the learned Additional Government Pleader that no personal hearing need to be given when an application had been made at the instance of the assesse, I am not in agreementd with the learned Additional Government Pleader. The Provisio indicates that when an order is being made adverse to the assessee, then he should be given an opportunity of being heard when the rectification adversely affects any person. The principles of natural justice had been inbuilt by way of the 3rd Proviso to Section 161."— Para 8 (rejecting Revenue's narrow construction of the third proviso)"If pursuant to a Rectification Application, if a rectification is made and if it adversely affects the assesse, Proviso 3 contemplates an opportunity of hearing to be given. However, when an Rectification Application is made at the instance of assessee and the rectification is being sought to be rejected without considering the reasons for rectification or by giving reasons as to why such rectification could not be entertained. It is also imperative that the assessee to be put on notice."— Para 8 (expanding the scope of natural justice under Section 161 — the core ratio)"I am inclined to hold that the order of rectification passed by the first respondent dated 02.02.2024 is contrary to the provisions of Section 161 and in that aspect, the same alone is set aside and the Rectification Application filed by the petitioner shall be taken afresh by the first respondent and after giving an opportunity to the petitioner, the first respondent shall pass appropriate orders and in accordance with law."— Para 9 (operative conclusion and direction)Final VerdictWrit Petition allowed. Rectification Order dated 02.02.2024 set aside as contrary to the provisions of Section 161 of the CGST/TNGST Act. Rectification Application to be taken afresh; first Respondent directed to grant opportunity of hearing to the Petitioner and then pass a reasoned order in accordance with law. All further remedies of the Petitioner preserved. No order as to costs.

BackgroundThe petitioner, Klassic Traders, a proprietary concern registered under GST, had ITC of Rs.43,18,514 available in its Electronic Credit Ledger (ECL). By order dated 06.06.2024, the Assistant Commissioner of Commercial Taxes, LGSTO-16, Bengaluru blocked the petitioner's ECL by invoking Rule 86A of the CGST Rules. No pre-decisional hearing was given to the petitioner before passing this order. The blocking order contained no independent reason to believe as to why the ECL needed to be blocked; it merely relied upon Enforcement authority reports stating that a registered supplier was found non-existent or not conducting business from its registered place. No independent application of mind was applied by the blocking authority. The petitioner challenged the blocking order by way of a writ petition before the Karnataka High Court seeking quashing of the order and unblocking of ITC, and also sought a declaration that Rule 86A is ultra vires Section 16(2) of the CGST Act. Court Observations (Verbatim / Near-Verbatim)"In the instant case, since no pre-decisional hearing was provided/granted by the respondents before passing the impugned order, coupled with the fact that the impugned order invoking Section 86A of the CGST Rules by blocking of the Electronic credit ledger of the petitioner does not contain independent or cogent reasons to believe except by placing reliance upon the reports of Enforcement authority which is impermissible in law, since the same is on borrowed satisfaction as held by the Hon'ble Division Bench of this Court, the impugned order deserves to be quashed.""It is also pertinent to note that in the impugned order except stating that 'a registered supplier who has been found to be non-existent or not to be conducting business from his place of registration', no other reasons are forthcoming in the impugned order. On this ground also, the impugned order dated 06.06.2024 deserves to be quashed."The Court further relied upon and reproduced the binding ratio from K-9-Enterprises (Division Bench), including:"The expression 'reason to believe' would necessarily mean that the respondents must arrive at a satisfaction based on their own independent inquiry and not upon borrowed inquiry.""A bonafide purchaser cannot be denied ITC on account of a supplier's default and the recipient cannot be made to suffer denial of ITC for the wrong doings of the supplier.""The impugned orders are bald, vague, cryptic, laconic, unreasoned and non-speaking and deserve to be set aside." Final VerdictThe writ petition was allowed. The blocking order dated 06.06.2024 was quashed. The respondents were directed to immediately unblock the ECL of the petitioner upon receipt of the order to enable filing of returns forthwith. Liberty was reserved to the respondents to proceed against the petitioner in accordance with law and in terms of the Division Bench judgment in K-9-Enterprises. 👍 

Facts:The petitioner challenged the show cause notice dated 03.05.2024 and the Order-in-Original dated 21.11.2023 issued under Section 73 of the CGST/IGST/SGST Acts for the financial years 2017-18 (July 2017 to March 2018), 2018-19, 2019-20 and 2020-21. The petitioner contended that the department issued a single consolidated show cause notice covering multiple tax periods instead of issuing separate notices for each financial year.Court Decision:The Court held that under Section 73 of the CGST Act, the limitation period of three years for passing an order is calculated separately from the due date of furnishing the annual return for each financial year. Consequently, actions relating to different financial years must be treated independently.Relying on the principles laid down by the Supreme Court and the Madras High Court, the Court held that issuance of a single consolidated show cause notice for multiple financial years is contrary to the statutory scheme of the CGST Act.Accordingly, the Court allowed the writ petition and quashed the show cause notice dated 03.05.2024 issued for the tax periods 2017-18 to 2020-21. The Court clarified that the respondent is at liberty to issue separate show cause notices for each assessment year in accordance with Section 73 of the CGST Act.Cases Referred by Court:·         Titan Company Ltd. v. Joint Commissioner of GST, W.P. No.33164 of 2023 (Madras High Court)·         State of Jammu and Kashmir and Others v. Caltex (India) Ltd., AIR 1966 SC 1350

BackgroundA batch of writ petitions was filed by multiple registered dealers before the Gauhati High Court challenging the constitutional validity of Sections 16(2)(c) and 16(2)(d) of the CGST Act, 2017 and the Assam GST Act, 2017, along with show cause notices issued to the petitioners. The core grievance in all the petitions was common — the Department sought to deny ITC to purchasing dealers on the ground that their respective selling dealers had failed to deposit the tax collected from them into the Government Treasury, despite the purchasing dealers having entered into genuine and bona fide transactions supported by valid tax invoices issued by validly registered selling dealers. FactsThe petitioners, being registered dealers, had purchased goods from registered selling dealers who had issued tax invoices in accordance with the provisions of the GST law. The purchasing dealers had duly paid the tax component to the selling dealers as part of their purchase transactions. However, the selling dealers failed to deposit the said tax into the Government Treasury. On this basis, the Department issued show cause notices to the purchasing dealers proposing to deny ITC claimed by them. The petitioners challenged both the constitutional validity of Sections 16(2)(c) and 16(2)(d) of the CGST Act, 2017 and the Assam GST Act, 2017, as well as the show cause notices and consequential orders issued thereunder. The senior counsel for the petitioners submitted that the controversy was squarely covered by the judgment of the Delhi High Court in On Quest Merchandising India Private Limited v. Government of NCT of Delhi & Ors. (2017 SCC OnLine Del 11286), wherein it was held that a purchasing dealer cannot be punished for the act of the selling dealer who failed to deposit tax collected. The respondents' counsel could not dispute that the controversy was covered by the said Delhi High Court judgment. Court Observations (Verbatim — Crucial Extracts)Delhi High Court in On Quest Merchandising India Private Limited v. Government of NCT of Delhi & Ors. (as quoted and adopted by the Gauhati High Court):"Applying the law explained in the above decisions, it can be safely concluded in the present case that there is a singular failure by the Legislature to make a distinction between purchasing dealers who have bona fide transacted with the selling dealer by taking all precautions as required by the DVAT Act and those that have not. Therefore, there was need to restrict the denial of ITC only to the selling dealers who had failed to deposit the tax collected by them and not punish bona fide purchasing dealers. The latter cannot be expected to do the impossible. It is trite that a law that is not capable of honest compliance will fail in achieving its objective. If it seeks to visit disobedience with disproportionate consequences to a bona fide purchasing dealer, it will become vulnerable to invalidation on the touchstone of Article 14 of the Constitution." — Para 39"The court respectfully concurs with the above analysis and holds that in the present case, the purchasing dealer is being asked to do the impossible, i.e., to anticipate the selling dealer who will not deposit with the Government the tax collected by him from those purchasing dealers and therefore avoid transacting with such selling dealers. Alternatively, what section 9(2)(g) of the DVAT Act requires the purchasing dealer to do is that after transacting with the selling dealer, somehow ensure that the selling dealer does in fact deposit the tax collected from the purchasing dealer and if the selling dealer fails to do so, undergo the risk of being denied the ITC. Indeed section 9(2)(g) of the DVAT Act places an onerous burden on a bona fide purchasing dealer." — Para 41"The court hereby holds that the expression 'dealer or class of dealers' occurring in section 9(2)(g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with section 50 of the Act where there is no mismatch of the transactions in Annexures 2A and 2B. Unless the expression 'dealer or class of dealers' in section 9(2)(g) is 'read down' in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution." — Para 53"The result of such reading down would be that the Department is precluded from invoking section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under section 40A of the DVAT Act." — Para 54Supreme Court Order on SLP (as quoted by the Gauhati High Court):"On hearing learned Additional Solicitor General appearing for the petitioner, we are not inclined to interfere with the impugned order. The special leave petition is dismissed."Gauhati High Court's Own Conclusion:"Having gone through the above referred judgments, we are of the view that the controversy raised in this batch of writ petitions is squarely covered by the decision of the Delhi High Court in the case of On Quest Merchandising India Private Limited (supra). Hence, the show cause notices impugned in the present writ petitions and the consequential orders are set aside. However, the Department is free to act in those cases, where the purchase transactions are not bona fide, in accordance with law." Final VerdictThe Gauhati High Court disposed of the batch of writ petitions by setting aside all show cause notices and consequential orders issued to the purchasing dealers. It was held that the controversy was squarely covered by the Delhi High Court judgment in On Quest Merchandising (supra) affirmed by the Supreme Court, and that ITC cannot be denied to bona fide purchasing dealers for the default of the selling dealer in depositing tax. However, the Department was expressly granted liberty to proceed against those purchasing dealers where the purchase transactions are found to be not bona fide.  

Facts:The petitioners, registered dealers under GST, were denied Input Tax Credit despite possessing valid invoices, proof of payment, and receipt of goods/services. In several cases, suppliers either failed to remit tax or failed to reflect transactions in returns, leading to denial of ITC under Section 16(2)(c). The petitioners challenged the provisions as imposing an impossible burden on recipients and also contested the time limitation under Section 16(4). Multiple writ petitions raising similar issues were heard together. Court Decision:The High Court upheld the validity of Sections 16(2)(c) and 16(4) of the GST Act. The Court held that Input Tax Credit is not an absolute right but a statutory entitlement subject to conditions prescribed under the Act. It was held that fulfillment of all conditions under Section 16(2), including actual payment of tax to the Government, is mandatory for availing ITC. The Court further held that the time limit prescribed under Section 16(4) is valid and enforceable, and ITC cannot be claimed beyond the stipulated period. Cases Referred by Court:•    On Quest Merchandising India Pvt. Ltd. v. Union of India •    Commissioner of Trade and Taxes v. Arise India Ltd. •    Jayam & Co. v. Assistant Commissioner •    ALD Automotive Pvt. Ltd. v. Commercial Tax Officer