GST ITC Reversal Demand Quashed for Lack of Hearing: Meghalaya HC allows Fresh Reply Opportunity [Read Order]

The Meghalaya High Court recently quashed an ex-parte order that demanded the reversal of Input Tax Credit ( ITC ) along with interest and penalties under Goods and Services Tax ( GST ).

The petitioner, Jayshree Jhunjhunwala, in this case had sold her business in September 2021, and her GST registration was officially cancelled in November 2022. Because she was no longer operating the business, she had stopped monitoring the GST portal.

When the GST department issued a show-cause notice in September 2023 regarding past ITC claims, she was entirely unaware of the action. The petitioner only discovered the legal proceedings much later, when recovery proceedings were initiated.

The petitioner argued that relying solely on a portal notification after a registration has been cancelled does not constitute valid service and effectively deprived her of her right to defend her case.

While the revenue authorities contended that the cancellation of a GST registration does not absolve a taxpayer of liabilities incurred while the business was active, the High Court noted the method of communication used by the department.

Justice B. Bhattacharjee and Justice H.S.Thangkhiew observed that there was no evidence of any physical or effective service of the notice beyond the digital upload. The Court found the petitioner’s lack of awareness justified, given that her formal relationship with the GST portal had ended with the cancellation of her registration.

Therefore, the Court set aside the original order dated December 22, 2023, and restored the matter to the stage of the show-cause notice.

The petitioner has been granted three weeks to file a formal reply, and the GST authorities have been directed to pass a fresh, reasoned order only after providing a proper hearing.

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