GST Show-Cause Notice Cannot Be Quashed Solely On Basis Of GSTR-2A Discrepancies: Gauhati HC

The Gauhati High Court has ruled that a writ court cannot quash a GST show-cause notice merely because an assessee claims bona fide status despite GSTR-2A discrepancies.

A Division Bench comprising Chief Justice Ashutosh Kumar and Justice Arun Dev Choudhury heard the intra-court appeal challenging a Single Judge's refusal to interfere with a show-cause notice issued under Section 73(1) of the Assam Goods and Services Tax Act, 2017. The appellant had sought the quashing of the notice on the ground that it possessed valid invoices and had made payments through banking channels, asserting that ITC cannot be denied solely due to a supplier's failure to reflect invoices in GSTR-2A.

Key Takeaways

Statutory Adjudication Over Writ Jurisdiction

The Gauhati High Court reaffirmed that the existence of jurisdictional facts for a show-cause notice does not warrant writ interference if the merits of the defense require factual adjudication by the proper officer.

GSTR-2A Not Sole Determinant

While acknowledging that an assessee's entitlement to ITC involves more than just electronic statements, the Gauhati High Court ruled that the validity of such credit must be established during the departmental adjudication process.

Exclusion of Limitation Period

The ruling clarifies that time spent by a litigant in pursuing writ proceedings against a notice, especially when an interim stay is obtained, will be excluded from the limitation period for final adjudication under Section 73(10).

Court Observations and Directions

The Gauhati High Court observed that the proper officer possesses the primary jurisdiction to examine whether GST was actually paid to the supplier and whether returns were filed. The Bench emphasized that an audit finding provides a legitimate basis for initiating proceedings and does not indicate a "pre-determined mind" by the authority. The Gauhati High Court explained the statutory aspects that “The authority issuing a show-cause notice undoubtedly possesses jurisdiction to initiate proceedings under Section 73 against the alleged wrongful availment or utilization of Input Tax Credit; however, the sustainability of such proposed demand shall depend upon the adjudication prescribed under Section 73 read with Section 75 of the Assam Goods and Services Tax Act, 2017. The appellant's legal defense may ultimately succeed before the proper officer, but the possibility that the appellant may succeed in adjudication is not a ground for holding that initiation of the proceeding itself is without jurisdiction.”

Ratio

Initiation of proceedings under Section 73 of the Assam Goods and Services Tax Act, 2017 based on audit objections regarding Input Tax Credit discrepancies is not without jurisdiction, even if the assessee claims to be a bona fide purchaser with valid documentation. The statutory adjudication process under Section 75 must be allowed to conclude to determine the factual veracity of GST payments and supplier defaults, and the period of stay granted by a writ court is excludable from the limitation period under Section 73(10).

Background

The appellant, M/s. Surya Business Private Limited, was audited for the financial year 2018-2019 under Section 65 of the Assam Goods and Services Tax Act, 2017. The audit revealed an alleged excess availment of ITC amounting to approximately ₹27.25 lakhs because inward supplies from M/s Atikur Rahman were not reflected in the appellant's GSTR-2A. Despite the appellant's reply asserting that payments were made via banking channels and citing Union of India v. Bharti Airtel Ltd. ( "(2022) 4 SCC 328": 2021 CaseBase(SC) 900), the department issued a show-cause notice on January 11, 2024.

The appellant challenged this notice via a writ petition, relying on the Gauhati High Court's decision in National Plasto Molding Vs State of Assam and others to argue that a bona fide purchaser cannot be penalized for a selling dealer's default. The Single Judge declined to quash the notice but allowed the appellant to raise all legal and factual defenses before the proper officer, while excluding the litigation period from the limitation period. The Division Bench, in the present appeal, upheld this view, dismissing the writ petition and affirming the Single Judge's order.

Case Details:
Case No.: WA/321/2026
Neutral Citation: 2026:GAU-AS:13966-DB
Case Title: M/S. Surya Business Private Limited v. The State of Assam and 3 Ors.
Appearances:
For the Petitioner(s): Mr. Ankit Kanodia, Advocate; Mr. P Das, Advocate; Ms. N Upadhyay, Advocate; Mr. Z Islam, Advocate.
For the Respondent(s): Mr. B. Choudhury, Standing Counsel (Finance and Taxation); Mr. M. Bhuyan, Advocate.

Source: 2026 CaseBase(GAU) 1287