Tax adjudication must consider a taxpayer’s recorded explanation before confirming proposed liability.

The petitioner challenged an adjudication order dated 15 December 2025 under Section 73 of the KGST/CGST Acts and a subsequent garnishee notice in Form GST DRC-13 dated 17 August 2026.

The adjudication proceeded on the basis that the petitioner had not responded to the audit note, intimation, or show-cause notice.

However, the record showed that the petitioner had replied to the Form GST ASMT-10 intimation on 19 September 2024, explaining that an apparent discrepancy in its GSTR-9 for FY 2021–22 arose from a clerical error in reporting SGST, and that tax had not been short-paid.

The petitioner also relied on a reply dated 1 March 2025 concerning the inspection.

1. Whether the adjudication order could stand when the petitioner’s prior response explaining the discrepancy was not considered.

2. Whether the consequential garnishee notice should be set aside and the petitioner given an opportunity to respond to the show-cause notice.

Section 73 of the KGST/CGST Acts governs determination of tax not paid, short-paid, or erroneously refunded, or input tax credit wrongly availed or utilised.

The Court applied the principle that a taxpayer’s relevant explanation on record must be considered when deciding whether the allegations in a show-cause notice should be affirmed.

Although the petition also sought rectification under Section 161 of the KGST Act, the Court did not determine that request.

The adjudication order treated the petitioner as having failed to respond, but the record contained an earlier reply asserting that the GSTR-9 discrepancy was clerical and that there had been no short payment of tax.

The Court considered that explanation material to deciding whether the show-cause notice’s allegations should be sustained.

Because the explanation had not been considered in the adjudication, the Court concluded that the proceedings should be restored for the petitioner to file a detailed response.

It directed the petitioner to file a detailed response to the show-cause notice with the third respondent by 27 October 2026, without further notice.