Aarti Enterprise Vs State of Gujarat & Anr (Gujarat High Court)
The writ petition before the Gujarat High Court arose from a system-generated notice in Form DRC-01A dated 09.11.2024 issued for Financial Year 2020–21. The notice alleged short reversal of Input Tax Credit (ITC) under Section 17(2) of the Gujarat State Goods & Services Tax Act, 2017 read with Rule 42 of the SGST Rules, on the assumption that the entire ITC availed by the petitioner was common ITC and therefore proportionately attributable to exempt supplies.
According to the petitioner, the notice was not responded to because the petitioner’s accountant was diagnosed with cancer and could not attend to the proceedings. A subsequent notice dated 21.11.2024 was issued on the GST portal, followed by three reminders on 31.12.2024, 08.01.2025, and 17.01.2025. Thereafter, the tax authority passed an order along with a summary in Form DRC-07 dated 05.02.2025 confirming the demand for short reversal of ITC.
The petitioner challenged the order on the ground that it violated the principles of natural justice and Sections 75(4) and 75(5) of the GST Act. It was argued that although reminders were issued, none of the notices or reminders specified the date, time, or venue of a personal hearing. It was also contended that the final order was cryptic and unreasoned, having been passed solely on the basis that the petitioner did not appear.
