Orders confirming excess budgetary support were set aside for failure to consider ITC explanations and supporting documents.

Lupin Limited was covered by the Budgetary Support Scheme notified by the Department of Industrial Policy and Promotion on 5 October 2017.

Under the Scheme, eligible support was calculated at 58% of Central Tax and 29% of Integrated Tax paid through the cash ledger after utilisation of eligible ITC.

For July 2017 to March 2018, Lupin claimed ₹12,63,99,662 and was granted ₹12,48,27,999 as budgetary support.

The Respondents subsequently alleged excess payment, initially quantified at ₹41,64,578, which was later revised to ₹37,93,159 after proceedings in an earlier writ petition and re-verification of documents.

The Assistant Commissioner thereafter passed an Order-in-Original dated 7 January 2025 confirming recovery of ₹37,93,159 with interest at 15% per annum, followed by an adjustment order dated 10 March 2025.

A sum of ₹75,40,592 was adjusted from the refund otherwise payable to Lupin for April–June 2024.

Lupin contended that an amount inadvertently disclosed in Table 8C of GSTR-9 had been wrongly relied upon to infer excess budgetary support, and that the ITC reflected in GSTR-2A was not legally available for utilisation.

Whether the Respondents properly considered Lupin’s explanation, reconciliation statements, invoices, account details and other supporting documents concerning the ITC reflected in GSTR-2A before confirming recovery of excess budgetary support?

Whether the impugned orders were sustainable in the absence of adequate reasons dealing with Lupin’s contention that the relevant ITC was not available for utilisation?

Whether Lupin was entitled to a further effective opportunity of hearing and fresh consideration of the alleged excess budgetary support?

The Court applied the terms of the Budgetary Support Scheme notified on 5 October 2017, under which support was linked to Central and Integrated Tax actually paid through the cash ledger after utilisation of eligible ITC.

It further applied the principles of natural justice and the requirement that an administrative or quasi-judicial authority consider relevant material and pass a reasoned order.

Where a taxpayer produces reconciliation statements, invoices and account records to explain an apparent ITC discrepancy, the authority must examine the documents, determine whether the ITC was legally available and capable of utilisation, and record reasons for accepting or rejecting the explanation.

The writ jurisdiction under Articles 226 and 227 was exercised to set aside orders affected by inadequate consideration of material and insufficient reasoning.

The Court found that the central question was not merely the disclosure in Table 8C of GSTR-9, but whether the ITC appearing in GSTR-2A was legally available and had actually been capable of utilisation by Lupin.

Lupin was required to substantiate its position through reconciliation statements, invoices and relevant accounting records.

However, the Respondents had not properly undertaken that examination or adequately recorded reasons addressing the supporting material and the explanation that the ITC was unavailable for utilisation.

Since the determination of excess budgetary support depended on the treatment of that ITC, the failure to conduct a proper document-based enquiry rendered the recovery orders unsustainable.

The Court therefore considered it appropriate to provide Lupin one further effective opportunity and directed a fresh, reasoned determination.

The Respondents were directed to reconsider the matter afresh after affording Lupin an effective opportunity of hearing.

Lupin was required to produce documents demonstrating why the ITC reflected in GSTR-2A was not available for utilisation, and the Respondents were directed to consider each explanation and document and record reasons in the final order.

The writ petition was accordingly disposed of, with the needful to be completed within two months.