GST ITC Reversal Cannot Be Ordered Without Proper Scrutiny of Records: Calcutta HC Remands Appeal [Read Order]

The Calcutta High Court has held that Input Tax Credit (ITC ) reversal under the GST Act cannot be sustained unless the appellate authority undertakes a proper scrutiny of the records and documents produced by the taxpayer, and has accordingly set aside a perfunctory appellate order and remanded the matter for fresh consideration.

The petitioner, Soumyendu Bikash Jana challenged an appellate order dated 18 July 2025 passed under Section 107 of the WBGST/CGST Act, 2017, by which the appeal against an adjudication order under Section 73 was rejected. The original show cause notice alleged short payment of tax on outward supplies for the period April 2018 to March 2019 and proposed reversal of allegedly excess ITC availed by the petitioner.

The petitioner contended before the High Court that although he could not file a reply to the show cause notice, all relevant documents substantiating the ITC claim were placed on record at the appellate stage.

It was argued that the petitioner was engaged partly in dealing with exempted goods and also functioned as a Goods Transport Agency (GTA), and therefore, the question of excess ITC availment did not arise.

The petitioner further submitted that taxes on taxable supplies had already been duly paid and that transportation bills and other supporting documents clearly demonstrated the correctness of the ITC claimed.

The appellate authority rejected the case without examining or even citing the substantial documentary material that was available.

The High Court observed that the appellate authority neglected to consider the fundamental questions posed by the petitioner and did not investigate whether the records supported the ITC claim.

Also, the State was unable to prove that these records were not in front of the appellate body when the contested ruling was issued.

Justice Om Narayan Rai held that non-consideration of material placed on record strikes at the very root of appellate adjudication and renders the order perverse. It said that ITC reversal involves serious civil consequences and therefore requires a reasoned examination of facts, records and explanations furnished by the taxpayer.

An appellate authority cannot mechanically confirm an adjudication order without evaluating the evidentiary material placed before it, said the court.

On this ground alone, the Calcutta High Court set aside the appellate order and remanded the matter to the appellate authority with directions to reconsider the appeal afresh. It permitted the petitioner to file an additional reply or submissions and directed the appellate authority to decide the appeal within six weeks, after due consideration of all documents on record.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates