BACKGROUNDThe petitioner, M/s. Manoja Kumar Nayak (GSTIN: 21AANPN1032G2Z6), engaged in transportation and works contract, availed Input Tax Credit (ITC) of Rs.4,39,970/- (IGST) during August–December 2017 on the strength of invoices issued by  Auxesia Traders, Kolkata (GSTIN: 19APGPB1744M1ZS). The said supplier was subsequently found to be a non-existent/fictitious entity, based on an Alert Notice No.11/2023-24 dated 19.03.2024 issued by DGGI, Kolkata Zonal Unit, and on the statement of its proprietor Shri Tamoji Bose recorded in 2019. Upon receipt of a letter dated 12.07.2024 from the Superintendent (Anti-Evasion), CGST & Central Excise, Rourkela Commissionerate, requesting reversal of the ITC, the petitioner proactively reversed the entire ITC of Rs.4,39,970/- through GSTR-3B returns filed for April 2023 (Rs.2,64,342/-) and June 2024 (Rs.1,75,128/-), well before issuance of the Show Cause Notice. The petitioner intimated this reversal to the Superintendent vide letter dated 17.07.2024, also pointing out that the Electronic Credit Ledger had a surplus balance exceeding the reversed amount at all material times, and therefore no interest under Section 50 was payable. Despite this, a Summary Show Cause Notice and Demand Show Cause Notice both dated 26.07.2024 were issued under Section 74 of the CGST Act. The petitioner filed a reply dated 30.01.2025 reiterating the voluntary reversal and surplus ECL balance. Ignoring the reply, the Adjudicating Authority passed Order-in-Original dated 03.02.2025 confirming demand of Rs.4,39,970/- (IGST), interest under Section 50, and penalty of Rs.4,39,970/- under Section 74 — solely on the basis of the DGGI Alert Notice, without any independent inquiry. Both petitioners (the second being M/s. Babamani Roadways & Borewells, similarly situated) filed writ petitions before the Orissa High Court challenging these orders. COURT OBSERVATIONS (Verbatim / Near-Verbatim)On mechanical invocation of Section 74 without independent inquiry:"The Adjudicating Authority without independent application of mind merely based on Alert Notice dated 19.03.2024 received from the DGGI, Kolkata Zonal Unit traversed his authority under Section 74 of the GST Act.""Thus, it can be seen from the approach made by the Adjudicating Authority that he blindly followed the Alert Notice of the DGGI, without undertaking any independent inquiry to ascertain credibility of such allegation qua the petitioner... Hence, discrediting such inchoate material being utilised for the purpose of raising demand of tax, interest and penalty under Section 74 this Court thus finds the determination of liability null and invalid in absence of any independent inquiry being carried out to verify the allegation contained in the Alert Notice of the DGGI.""Allegation against supplier vide Alert Notice No.11/2023-24, dated 19.03.2024 would not ipso facto empower the Adjudicating Authority to initiate action against the recipient (petitioner) under Section 74. The language employed in Section 74 suggests that strong and tangible material must be available on record to suggest that the petitioner had the conscious and active involvement in such dubious transactions."On supplier's default not ipso facto establishing recipient's fraud:"It may be highlighted that input tax credit could be availed erroneously or on a mistaken interpretation of law. Therefore, it would not be apposite to form an opinion that in each and every case where the supplier admits or defaults, it would lead to infer that the recipient fraudulently in order to evade tax has availed the input tax credit against fake/bogus invoices.""No inference or presumption or assumption can be deduced that mere availability of balance in the Electronic Credit Ledger would lead to suggest there was utilization."On the period of limitation and abuse of Section 74:"It is emerged from the chronology of events obtained on record that after the period of limitation stipulated in Section 73 is lapsed, the Adjudicating Authority has sought to initiate proceeding under Section 74... pertaining to transactions during August, 2017 to December, 2017, the proceeding under Section 74 is drawn up by issue of Summary of Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 conspicuously after 8 years of the alleged transactions."On interest under Section 50:"The Clarification dated 17.07.2023 read juxtaposed with provisions of Rule 88B there is no ambiguity that when the Electronic Credit Ledger has sufficient balance left for adjustment of reversal of input tax credit no interest is chargeable or payable under Section 50."On penalty and double taxation:"Since there is no tax implication in the instant case, as the matter related to wrong availment of input tax credit on account of fake/bogus invoices issued by the supplier and the petitioner has reversed the alleged amount of input tax credit prior to initiation of proceeding under Section 74, the imposition of penalty cannot be a mechanical exercise of power and, thus such order is unsustainable.""Once it is conceded by the Revenue that the amount of input tax credit for a sum of Rs.4,39,970/- has been reversed, raising demand to the same without giving due credit to such reversal is unethical and without authority of law. In such an event, since net tax effect would be 'zero', thereby no penalty would be imposable."On bona fides of the petitioner:"Nonetheless, the petitioner has shown bona fide by reversing the amount of input tax credit the moment a letter from the Superintendent (Anti-Evasion) was issued bringing such conduct of the supplier to his notice." FINAL VERDICTBoth writ petitions allowed. The Order-in-Original dated 03.02.2025 passed under Section 74 — confirming demand of Rs.4,39,970/-, interest under Section 50, and penalty of Rs.4,39,970/- — is quashed. No order as to costs.   

BackgroundThe Petitioner, engaged in trading and export of branded mobile phones, was subjected to a Special Audit for Financial Year 2021-22 appointed under Section 66 of the CGST/DGST Act, 2017 vide email dated 06.12.2024. Upon completion of the audit, observations were communicated on 03.03.2025, to which the Petitioner filed a detailed response on 02.04.2025. Thereafter, a demand notice dated 11.09.2025, based on the special audit report dated 27.03.2025, raised a demand of Rs. 33,54,21,609/- requiring discharge within 7 days. A Show Cause Notice dated 24.09.2025 was subsequently issued proposing a demand of Rs. 58,02,79,384/-, with a reply deadline and personal hearing fixed for 28.10.2025. The Petitioner filed a detailed reply along with supporting documents on 24.10.2025, having sought a short adjournment of the hearing. Then, on 27.12.2025 at 05:20 PM, a communication styled as "Reminder-1" was issued calling for additional documents by 29.12.2025 and fixing a personal hearing for 30.12.2025 — the intervening 28.12.2025 being a Sunday. Despite a request for a 7-day extension made on 29.12.2025, the Order-in-Original was passed on 31.12.2025 confirming a demand of Rs. 26,72,64,497/- (including tax, interest and penalty) — on the very same day as the last personal hearing.Critical Timeline27.12.2025 — 05:20 PMReminder-1 issued demanding voluminous documents including certified bank statements by 29.12.2025; personal hearing fixed for 30.12.202528.12.2025Sunday — no working day available29.12.2025Petitioner sought 7-day adjournment — request not considered30.12.2025 & 31.12.2025Personal hearings held; petitioner's authorised representative participated; additional reply filed on 31.12.202531.12.2025 — same dayOIO passed confirming demand of Rs. 26,72,64,497/- on the very day the hearing concluded — the last date under Section 73(10) limitationSeparate SCN dated 04.07.2025 for the same FY 2021-22, also adjudicated on 31.12.2025, resulted in the Petitioner being discharged on all counts — including the very same ITC issues — creating a directly contradictory finding in the impugned OIO.Relevant FactsThe Petitioner raised three distinct grounds: first, that the opportunity of hearing was illusory and not real — Reminder-1 was issued at 05:20 PM on 27.12.2025, with 28.12.2025 being a Sunday, leaving less than one effective working day to collate voluminous documents including certified bank statements and records running into several hundred pages; second, that the OIO was passed with undue haste — the personal hearing concluded and the OIO was signed on the very same date (31.12.2025), the last date permissible under Section 73(10), raising a legitimate apprehension that material placed on record was not adequately considered; and third, that parallel proceedings were run on the same subject matter for the same FY, with a separate SCN dated 04.07.2025 having been adjudicated on the same date resulting in complete discharge of the Petitioner, rendering the impugned OIO internally contradictory. Additionally, a complete copy of the OIO was not furnished, only a partial copy having been placed on record. The Revenue contended that the petition was not maintainable given an appeal remedy under Section 107, that the petitioner had appeared and filed an additional reply, that the two SCNs pertained to distinct transactions, and that the order was reasoned.Court Observations (Verbatim)"Reminder-1 was issued on 27.12.2025 at 05:20 PM, calling upon the petitioner to furnish additional documents by 29.12.2025 and to appear for personal hearing on 30.12.2025. Admittedly, 28.12.2025 was a Sunday. The petitioner, therefore, had less than one effective working day to collate the material and respond."— Para 28"The nature of documents sought, including certified bank statements and voluminous records running into several hundred pages, could not have been reasonably procured and furnished within such a truncated timeline. The petitioner, in fact, sought a short adjournment of seven days on 29.12.2025. The record does not indicate that the said request was duly considered."— Para 29"Though it is the stand of the respondent that the petitioner participated in the personal hearing on 30.12.2025 and 31.12.2025, mere participation cannot be constructed as compliance with the requirement of affording a fair and effective opportunity. The opportunity contemplated under Sections 66(4) and 75(4) of the CGST/DGST Act is not a mere formality but must be real, reasonable and effective."— Para 30"The timeline, as notice hereinabove, clearly demonstrates that the opportunity afforded to the petitioner was illusory. The petitioner was neither granted adequate time to place the requisite material on record nor to effectively respond to the issues raised in the special audit and the SCN."— Para 31"The submission of the respondent that the petitioner had earlier filed a reply to the SCN does not dilute the requirement of granting a reasonable opportunity when additional material is sought to be relied upon. Once further documents were called for and a hearing was fixed, the respondent was under an obligation to ensure that sufficient time was afforded."— Para 32"This Court also finds merit in the contention of the petitioner that the OIO has been passed with undue haste. The personal hearing concluded on 31.12.2025 and the OIO has been passed on the very same date, confirming a substantial liability. In the facts of the present case, such haste raises a legitimate apprehension that the material placed on record may not have been adequately considered by the Adjudicating Authority."— Para 33"The contention of the respondent regarding availability of an alternate remedy under Section 107 of the Act does not merit acceptance in the present case. It is well settled that where an order is passed in violation of the principles of natural justice the existence of an alternate remedy would not operate as a bar to the exercise of writ jurisdiction."— Para 34Final VerdictPetition allowed. OIO dated 31.12.2025 confirming demand of Rs. 26,72,64,497/- quashed and set aside. Matter remanded for fresh adjudication as a "last chance" — Petitioner to appear before the Adjudicating Authority on 06.04.2026 with written submissions and required documents. Authority directed to grant real opportunity of hearing, consider all contentions, and pass an expeditious reasoned order. Court has not gone into the merits; all rights and remedies of both parties kept open.  

Facts:The respondent purchasing dealers claimed Input Tax Credit (ITC) on purchases made from various sellers. The Assessing Officer disallowed ITC on the ground that several selling dealers were deregistered, had not filed returns, or denied transactions, raising doubts about genuineness. The first Appellate Authority upheld the disallowance. However, the Tribunal and High Court allowed ITC primarily on the basis of invoices and payments through cheques. Court Decision:The Supreme Court held that the burden under Section 70 lies on the purchasing dealer to prove the genuineness of transactions. Mere production of invoices or payment through banking channels is not sufficient. The dealer must establish actual physical movement of goods and provide supporting evidence such as transport details, delivery acknowledgment, and seller details. Since the purchasing dealers failed to discharge this burden, the Court set aside the High Court and Tribunal orders and restored the disallowance of ITC by the Assessing Officer. Cases Referred by Court:•    Corporation Bank v. Saraswati Abharansala (2009) 19 VST 84 (SC) •    Bhagadia Brothers v. Additional Commissioner of Commercial Taxes (Karnataka High Court) •    Madhav Steel Corporation v. State of Gujarat (Gujarat High Court) •    Shreeji Impex v. State of Gujarat (Gujarat High Court) •    On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi   

BackgroundThe petitioners challenged an order passed by the SGST authority. Pursuant to an earlier order dated 24.02.2026, the department filed an affidavit dated 02.03.2026 setting out the relevant details and seeking to explain the issue of non-cross-examination of witnesses. Two procedural grievances were at the core of the matter: the non-supply of relied-upon documents along with the show cause notice, and the refusal to permit cross-examination of witnesses whose statements were relied upon by the department.FactsOn instructions from the Assistant Commissioner (SGST) present in Court, it was submitted that the explanation in the department's affidavit relating to non-cross-examination of the witnesses did not appear to be in consonance with the settled position of law, and that an appropriate opportunity was required to be extended to the petitioners to cross-examine the relevant witnesses as demanded. As regards the documents mentioned in the affidavit-in-reply, it was conceded that the same were supplied during the course of inquiry and not along with the show cause notice. The Court thus had before it two short grounds: subsequent (rather than contemporaneous) supply of the relied-upon documents, and refusal of cross-examination.Court Observations (Verbatim)Para 3: "Under the circumstances, since we find that the documents on which reliance has been placed during the investigation / inquiry were supplied to the petitioners subsequently and not along with the show cause notice, the same would amount to violation of the principles of natural justice. The second aspect pertains to the refusal to extend the opportunity of cross-examination, as demanded by the petitioners, of those witnesses whose statements have been relied upon by the department. Such inaction also violates the fundamental principle of fair opportunity of hearing."Para 4: "Thus, only on these two short grounds, the impugned order deserves to be quashed and set aside. The matter is remanded to the respondent authority for a fresh inquiry / investigation from the stage of issuance of the show cause notice."Para 5: "We direct that all the documents on which reliance is placed by the respondents shall be supplied to the petitioner along with the list of Relied Upon Documents (RUDs). In the event, the petitioner requests cross-examination of any witnesses whose statements are relied upon by the department, such opportunity shall be extended and appropriate orders shall be passed in accordance with law. The inquiry shall be completed within a period of three months."Para 7: "It is clarified that we are not setting aside the show cause notice and the inquiry shall proceed thereafter, after the RUDs are supplied to the petitioners."VerdictThe impugned order was quashed and set aside on the two grounds of non-supply of relied-upon documents with the show cause notice and refusal of cross-examination, both being violations of natural justice. The matter was remanded for fresh inquiry from the stage of the show cause notice, with a direction to supply all RUDs and extend cross-examination if requested; the show cause notice itself was not set aside, and the inquiry is to be completed within three months.

BACKGROUNDEmerson Process Management (India) Pvt. Ltd., registered under GST in multiple states including Gujarat and Maharashtra, amalgamated M/s Pentair Valves and Controls India Pvt. Ltd. into itself pursuant to an NCLT-approved scheme of amalgamation dated 14.11.2019. As part of the merger, all assets and liabilities of the transferor company — including its unutilized ITC balance — were transferred to the petitioner. The unutilized ITC pertained primarily to CGST, having been transitioned from the Central Excise regime through Form GST TRAN-1. When the petitioner attempted to transfer this ITC through Form GST ITC-02 on the online GST portal, the portal displayed an error message: "Transferee and Transferor should be of the same State - U.T." Despite multiple reminders dated 08.08.2022 and 26.03.2024, and several personal visits to the jurisdictional officer, no resolution was provided. The petitioner approached the Gujarat High Court under Article 226 of the Constitution challenging the portal restriction as illegal and contrary to the provisions of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules. COURT OBSERVATIONS (Verbatim)On the illegal endorsement on statutory form:"We find that such incorporation has been made in the statutory form itself without referring to any provisions under which the same is passed. In our considered opinion, the reasons assigned in the statutory form should be separate, clearly demarcating the opinion of the department and shall not be embossed on the statutory form which has been done in the present case.""The statutory ITC form which is issued under Rule 41 of the CGST Rules does not contain any such column of specifying or recording of the opinion of the concerned officer assigning his/her reason for not accepting the statutory form."On absence of statutory prohibition:"We do not find any convincing reason to take a contrary view to that taken by the Bombay High Court. The transfer of the ITC on amalgamation of the company is permissible as per the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules. Neither of the provision prohibits or debars transfer of the ITC on the ground that the transferee and the transferor company are located in different states.""We are of the opinion that the respondent department cannot incorporate something in a statutory form ITC-02 on GST Portal which is absent in the statutory provisions. The remark which is mentioned on the Form GST ITC-02 does not find place in the statute. Neither the statute permits nor debars the transfer of ITC after the scheme of amalgamation has been approved by the NCLT. Such an action of restricting the transfer of ITC on the on-line GST portal is de hors the intention of the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules."On manual processing (interim direction):"We clarify that till proper amendment or mechanism is provided in uploading the Form ITC-02, the respondent department shall accept such forms manually and process the same. We direct that the petitioner should be allowed to fill up the Form ITC-02 manually. The same shall be processed within a period of six weeks from the date of receipt of order of this Court." FINAL VERDICTWrit petition allowed. Rule made absolute. The GST portal restriction of "same State/UT" in Form ITC-02 held to be without any statutory basis and illegal. Department directed to accept Form ITC-02 manually and process transfer of CGST ITC within six weeks. 👍