Failure to Furnish Verification Reports and Conduct Detailed Records Verification Vitiates Adjudication for Natural Justice Breach.

The Petitioner, a chemical manufacturer, sought to transition input tax credit from the pre-GST regime to the Goods and Services Tax (GST) regime by filing GST TRAN-1 and TRAN-2 forms under Section 140 of the CGST Act.

Following an audit and a Show Cause Notice (SCN) dated December 9, 2021, seeking recovery of approximately ₹22.4 crores, the Petitioner submitted a detailed reply and invoices for verification.

Respondent No. 3 deputed officers for physical verification, who prepared reports on January 27 and February 3, 2025.

However, Respondent No. 3 passed the Impugned Order dated February 5, 2025, confirming a demand of approximately ₹16 crores plus interest and penalty, without furnishing the verification reports to the Petitioner or allowing them to address observations regarding "paucity of time" and alleged failure to produce stock registers.

Whether the Impugned Order was passed in violation of the principles of natural justice due to the non-furnishing of verification reports and lack of fair opportunity to respond to observations.

Whether the adjudication process was vitiated by procedural haste and failure to verify the complete record/invoices.

The Court primarily applied Article 226 of the Constitution of India regarding the High Court's writ jurisdiction to correct jurisdictional errors and breaches of natural justice.

It relied on the fundamental principle of Audi Alteram Partem, which mandates that no person shall be condemned unheard and requires the disclosure of all relied-upon evidence (such as verification reports) to the affected party.

Furthermore, the Court referenced Section 140 of the CGST Act, 2017, and Rule 117 of the CGST Rules, which govern the transition of input tax credit.

alongside Circular 182/14/2022-GST regarding the verification of transitional credit claims.

The Court observed that Respondent No. 3 relied on internal verification reports dated January 27 and February 3, 2025, to conclude that the Petitioner was ineligible for credit, yet failed to provide these reports to the Petitioner prior to the personal hearing or the final order.

The Court noted that the Impugned Order itself recorded that jurisdictional officers could not verify all invoices or the large stock register due to a "paucity of time" and "workload".

The Court reasoned that any opinion formed behind the back of the Petitioner using undisclosed documents constitutes a clear breach of natural justice.

It further characterized the adjudication as a "hurried exercise" where the Petitioner was denied the opportunity to rectify technical errors (such as entering data in the wrong columns of Table 7(b) vs. Table 5(a)) despite the availability of supporting records.

The Court quashed and set aside the Order-in-Original dated February 5, 2025.

The proceedings were remanded to Respondent No. 3 for de novo consideration with specific directions to: (i) furnish the copies of the verification reports to the Petitioner; (ii) grant an opportunity to the Petitioner to rectify clerical/column errors in the TRAN forms; and (iii) pass a fresh order within two months after a fair hearing.

No costs were awarded.