Mongal Deep Enterprise & Anr. Vs State of West Bengal & Ors. (Calcutta High Court)
Calcutta HC Directs Fresh Adjudication of ITC Mismatch Demand for Non-Compliance with Circular 183
The Calcutta High Court considered a writ petition challenging an ex parte assessment order dated 11.12.2023 passed under Section 73 of the CGST Act and an appellate order dated 1.3.2025 affirming the assessment. The petitioners, traders of food products under the franchise of “Monginis Snacks” now known “Mio Amore”, challenged the demand of Rs. 2,28,241/- raised for the period July 2017 to March 2018 on account of alleged ITC mismatch.
The petitioners relied upon Circular No. 183/15/2022-GST dated 27th December, 2022, which prescribes the procedure to be followed before raising a demand on account of mismatch between FORM GSTR-3B and FORM GSTR-2A. The Circular requires the proper officer to first seek details regarding invoices on which ITC was availed but which were not reflected in FORM GSTR-2A and then ascertain fulfilment of the conditions under Section 16 of the CGST Act, including possession of the relevant tax invoice or debit note, receipt of goods or services, and payment towards the value of supply along with tax to the supplier.
The petitioners submitted that the prescribed procedure was not followed and that the show-cause notice was not served upon them, resulting in their inability to file a reply. Consequently, an ex parte adjudication order dated 11.12.2023 was passed. The petitioners thereafter preferred a statutory appeal for Financial Year 2017-18 upon depositing the requisite pre-deposit, but the appellate authority dismissed the appeal ex parte by order dated 1.3.2025 without considering the grounds raised.
The respondent authorities opposed the petition, contending that there was no illegality or irregularity in the proceedings. It was submitted that the petitioners had not filed a reply to the show-cause notice and that an opportunity of personal hearing had been afforded but was not availed.
The High Court found that the petitioners had made out a prima facie case warranting interference. The Court took judicial note of the screenshot of the show-cause notice and the consequential ex parte orders. It observed that the impugned orders appeared to have been passed without adhering to paragraph 4 of Circular No. 183/15/2022-GST dated 27th December, 2022. According to the Court, the mandate of the Circular requires the proper officer to first seek details and verify fulfilment of the conditions of Section 16 before confirming an ITC mismatch demand, and such exercise did not appear to have been undertaken.
The Court accordingly directed the petitioners to file a comprehensive representation before respondent no. 4 on or before 30th September, 2026 along with supporting documents. Respondent no. 4 was directed to consider and dispose of the representation in light of Circular No. 183/15/2022-GST dated 27.12.2022 by passing a reasoned order in accordance with law after providing a reasonable opportunity of hearing, with the decision to be communicated to the petitioners within a week thereafter.
The adjudicating authority was left at liberty to take an independent decision on merits without being influenced by the observations in the writ order. The High Court expressly disposed of the writ petition without going into the merits of the case. Thus, the Court did not finally determine the petitioners’ entitlement to the disputed ITC or the validity of the demand, but directed fresh consideration after following the procedure contemplated by the Circular.
TaxGuru has also covered Circular No. 183/15/2022-GST and the procedure for dealing with differences between FORM GSTR-3B and FORM GSTR-2A. Related coverage includes Karnataka High Court on ITC reversal for non-following of Circular 183 and GST demand and natural justice under Section 73.
Appellant was represented by: Himangshu Kumar Ray
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. Affidavit of service filed in Court today by the petitioner is taken on record.
2. The petitioners are engaged as traders of food products under the franchise of brand of “Monginis Snacks” now known “Mio Amore”. Petitioner no. 1 is an unregistered partnership firm duly registered under the Central Goods and Services Tax Act, 2017 (hereinafter “CGST Act) and the West Bengal Goods and Services Tax Act, 2017(hereinafter referred to as WBGST Act.
3. The issue involved herein is whether the ex parte assessment order dated 11.12.2023 passed under Section 73 of the CGST Act, and the ex parte appellate order dated 1.3.2025 affirming the same, are sustainable in law, particularly in light of circular of 183/15/2022-GST Dated 27th December, 2022 stating to reconciliation of ITC between FORM GSTR-3B and FORM GSTR-2A.
4. The learned Counsel appearing for the petitioners submits that a show-cause notice was issued on 29.09.2023 for the period of July 2017 to March 2018 by raising a demand of Rs. 2,28,241/-, on account of alleged mismatched of ITC.
5. The said demand is contrary to Circular No. 183/15/2022-GST dated 27th December, 2022. Reliance is placed upon paragraph 4 of the said circular, “that before raising any demand on account of ITC mismatch, the proper officer is mandated to” which is reproduced below:
“The proper officer shall first seek the details from the registered person regarding all the invoices on which ITC has been availed by the registered person in his FORM GSTR 3B but which are not reflecting in his FORM GSTR 2A. He shall then ascertain fulfillment of the following conditions of Section 16 of CGST Act in respect of the input tax credit availed on such invoices by the said registered person:
i. That he is in possession of a tax invoice or debit note issued by the supplier or such other taxpaying documents;
ii. That he has received the goods or services or both;
iii. That he has made payment for the amount towards the value of supply, along with tax payable thereon, to the supplier”.
The said procedure was not followed in the present case.
6. It is submitted that since the show-cause notice was not served upon the petitioner. As a result the petitioners had no knowledge of the same and were unable to file a reply. Consequently an ex parte order of adjudication order dated 11.12.2023 was passed by the respondent no.4.
7. Aggrieved thereby the petitioners preferred a statutory appeal for Financial Year 2017-18 upon deposit of the requisite pre-deposit. However, the appellate authority vide order dated 1.3.2025 dismissed the appeal ex parte without considering the grounds raised in the appeal.
8. It is therefore contended that both the adjudication order and the appellate order are exfacie illegal, in violation of principles of natural justice, and a liable to be set aside.
9. The learned Counsel appearing for the respondent authorities vehemently opposes the submission of the petitioner and submits that there is no illegality and/or irregularity committed by the respondent authorities. Since the petitioners did not file any reply to the show-cause notice, the adjudicating authority was justified in passing the ex parte order.
10. It is further submitted that an opportunity of personal hearing was afforded to the petitioner which was not availed. Therefore, the petitioners cannot now claim violation of natural justice.
11. After hearing the rival contention of the parties and upon perusal of the materials on record, this Court is of the view that the petitioner has been able to make out a prima facie case warranting interference at this stage.
12. This Court has taken judicial note of the screenshot of the show-cause notice at page 71 of the writ petition and also the consequential orders passed ex parte by the respondent authorities.
13. It appears that the impugned orders have been passed without adhering to the procedure prescribed in paragraph 4 of circular no. 183/15/2022-GST dated 27th December, 2022. The mandate of the said circular requires the proper officer to first seeks details and verify fulfillment of the conditions of Section 16 before confirming any demand on account of ITC mismatch. Such exercise does not appear to have been undertaken.
14. In view of the above observations, the writ petition is disposed of on the following grounds:
1) The petitioner are directed to file a comprehensive representation before respondent no. 4 on or before 30th September, 2026 along with all supporting documents.
2) Respondent no. 4 shall consider and dispose of the said representation in light of circular no. 183/15/2022 GST dated 27.12.2022 by passing a reasoned order in accordance with law after affording a reasonable opportunity of hearing to the petitioner. Such decision shall be communicated to the petitioners within a week thereafter.
3) The petitioner shall not seek any unnecessary adjournments before the adjudicating authority.
4) The adjudicating authority shall be at liberty to take an independent decision on merits without being influenced by any observations in this order. 10. With the aforesaid observations and directions, the writ petition is disposed of without going into the merits of the case.
