Bombay HC Quashes ₹22 Crore GST Demand u/s 140 Transitional Credit, Order Faulted for Withholding Verification Reports [Read Order]
GST adjudication must be based on complete verification and a fair hearing.
In a recent ruling, the Bombay High Court has struck down a ₹22 crore GST demand under , holding that the adjudicating authority acted in breach of natural justice by passing the order without furnishing verification reports to the company.
The case filed by the petitioner, Pidilite Industries Ltd, against the order passed by the Additional Commissioner is against the principles of natural justice and was passed without furnishing copies of verification reports. The case mainly arises from the transitional input tax credit claimed by Pidilite under Section 140 of the CGST Act, 2017.Section 140 of the CGST Act
The tax department alleged irregularities and issued a show cause notice in December 2021, questioning credits worth ₹21.73 crore. After hearings and partial verification, the Additional Commissioner passed an order on 5 February 2025, disallowing credits of ₹15.34 crore and ₹68.54 lakh, along with interest and penalty totalling ₹16.02 crore.
The petitioner argued that although officers had conducted verification visits, the resulting reports dated 27 January 2025 and 3 February 2025 were never shared with them. The company stressed that this deprived them of an opportunity to respond to adverse findings, especially where credits were disallowed merely due to column mismatches in GST forms.
On the other hand, the respondent said that the company had not submitted VAT returns or collateral documents up to 21 January 2025.
After concerning all matters, the high court noted that a fairhearing was denied for the petitioner since verification reports were not furnished before passing the order, and the adjudication was a hurried exercise, carried out without full verification of invoices, records, and stock registers.
The officials were criticised for resorting to hasty actions despite their duty to pass orders only after complete verification.
The Division Bench of Justices G.S. Kulkarni and Aarti Sathe quashed and set aside the impugned order, and the proceedings were remanded for de novo consideration by the adjudicating authority.
It was also held that the authority must furnish verification reports to Pidilite and grant a fair hearing, including allowing rectification of column mismatches in GST forms. Along with that, they said a fresh order must be passed within two months, strictly in accordance with the law.
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