Typographical Error in SCN Not Fatal, But Taxpayer Entitled to Fresh Adjudication

Facts of the Case

• The petitioner challenged an order dated 21.01.2026 passed under Section 74A of the CGST Act.
• The department alleged wrongful availment of ITC on purchases made from M/s. Rabin Traders during May 2024.
• A demand of tax, interest and penalty amounting to ₹7,19,820 was confirmed.
• The petitioner did not file any reply to the Show Cause Notice dated 15.07.2025.
• The petitioner contended that the Show Cause Notice incorrectly mentioned the tax period as FY 2020-21.
• The petitioner also stated that the disputed ITC was reflected in GSTR-2A and GSTR-2B.

Defence of the Petitioner

• The Show Cause Notice contained a typographical error regarding the tax period, creating confusion.
• The ITC was supported by valid tax invoices.
• The ITC was reflected in GSTR-2A and GSTR-2B.
• The supplier had allegedly paid the corresponding GST.
• The petitioner claimed that officials had orally informed them that the proceedings would be dropped.
• Reliance was placed on various High Court and Supreme Court judgments holding that bona fide purchasers should not be denied ITC when tax has been paid by the supplier.

Defence of the Department

• The detailed table attached to the Show Cause Notice clearly contained invoice details relating to May 2024.
• The supplier’s GSTIN, invoice numbers, invoice dates and tax amounts were specifically mentioned.
• Therefore, the petitioner was fully aware of the allegations despite the typographical error.
• Since no reply was filed, the adjudicating authority was justified in confirming the demand.

Findings of the Court

• The Court held that the Show Cause Notice did contain a typographical error regarding the tax period.
• However, the invoice-wise details in the notice clearly identified the transactions under dispute.
• The petitioner ought to have filed a reply instead of remaining silent.
• No procedural irregularity or illegality was found in the adjudication process.
• Nevertheless, the Court considered that the petitioner had not been given an opportunity to establish its case on merits regarding the disputed ITC.

Decision of the Court

• The Court did not set aside the proceedings on merits.
• The matter was remanded to the adjudicating authority for fresh adjudication.
• The petitioner was directed to:
  • Deposit 10% of the disputed tax, and
  • File a detailed reply within 30 days.
• Upon compliance, the authority was directed to pass a fresh order after considering the petitioner’s submissions.
• In case of non-compliance, the writ petition would stand dismissed automatically and the department would be free to recover the demand.

Relevance to ITC Disputes

• The judgment recognizes that ITC disputes involving alleged non-genuine suppliers require examination of facts and evidence.
• Reflection of ITC in GSTR-2A and GSTR-2B is a relevant factor that must be considered by the adjudicating authority.
• Demand cannot be sustained merely because allegations are made against the supplier without considering the recipient’s defence.
• The case supports the principle of granting adequate opportunity of hearing before denying ITC.

Relevancy of the Case to SCN (Show Cause Notice)

• The case highlights that a taxpayer must carefully respond to a Show Cause Notice even if it contains minor errors or typographical mistakes.
• The Madras High Court held that where the SCN substantially discloses the allegations, invoice details, tax period, and basis of demand, the taxpayer cannot avoid filing a reply merely because of an error in one part of the notice.
• At the same time, the Court emphasized that the adjudicating authority must consider the taxpayer’s explanation and cannot mechanically confirm the demand without proper adjudication.
• Therefore, the case is relevant to the principle that an SCN must provide sufficient particulars to enable an effective defence, and any adjudication should be preceded by adequate opportunity of hearing.

Relevancy of the Case to ITC (Input Tax Credit)

• The case is directly relevant to disputes involving denial of ITC on the ground that the supplier is alleged to be non-genuine or non-compliant.
• The petitioner argued that the ITC was reflected in GSTR-2A and GSTR-2B and that the supplier had discharged the tax liability.
• The Court considered these contentions important enough to warrant fresh adjudication rather than allowing the demand to stand solely because no reply had been filed.
• The judgment reinforces that ITC disputes must be decided after examining invoices, return data, tax payment details, and the recipient’s evidence.
• It supports the proposition that ITC cannot be denied merely on allegations against the supplier without affording the recipient an opportunity to establish the genuineness of the transactions.

One-Line Relevance

The case establishes that while a taxpayer must respond to a properly detailed SCN, denial of ITC requires a reasoned examination of the recipient’s evidence, including GSTR-2A/GSTR-2B records and supplier tax compliance, before the demand can be sustained.

Additional Legal Principles Emerging from the Judgment

1. Typographical Error in SCN Does Not Automatically Invalidate Proceedings

The Court held that a mere clerical or typographical error in the Show Cause Notice will not render the proceedings invalid if the notice, read as a whole, clearly conveys the allegations and enables the taxpayer to understand the case against him.

2. Duty of the Taxpayer to Respond to SCN

The Court emphasized that once a Show Cause Notice contains sufficient particulars, the taxpayer is under an obligation to file a reply. Failure to respond may justify ex parte adjudication by the department.

3. Substance Prevails Over Form

The Court preferred a substantive interpretation of the notice rather than a technical one. Although the tax period was wrongly mentioned in one paragraph, the invoice-wise details clearly disclosed the transactions under dispute. Therefore, the notice was not treated as defective.

4. Remand Despite No Procedural Illegality

A significant aspect of the judgment is that the Court found no fault with the department’s procedure, yet remanded the matter in the interest of justice. This demonstrates that High Courts may grant an opportunity for fresh adjudication where substantial rights are involved, even in the absence of procedural irregularity.

5. Importance of Merits-Based Adjudication

The Court recognized that issues relating to ITC eligibility, supplier compliance, and genuineness of transactions require examination on merits and should not be concluded solely because the taxpayer failed to initially participate in the proceedings.

6. Conditional Relief by High Court

The Court balanced the interests of both parties by directing the taxpayer to deposit 10% of the disputed tax before obtaining the benefit of re-adjudication. This reflects the principle that equitable relief may be granted subject to reasonable conditions.

7. Recognition of GSTR-2A and GSTR-2B as Relevant Evidence

Although the Court did not finally decide the ITC issue, it acknowledged the taxpayer’s contention that the credit was reflected in GSTR-2A and GSTR-2B. This indicates that such records are relevant evidence and must be considered during adjudication.

8. Parallel Proceedings Cannot Continue Simultaneously

The judgment records that an earlier DRC-01 proceeding on the same issue was dropped because a fresh proceeding under Section 74A had been initiated. This supports the principle that duplicate proceedings on the same cause of action should not continue simultaneously.

9. Natural Justice Can Be Restored Through Remand

The Court effectively restored the taxpayer’s opportunity to present evidence and arguments by remanding the matter. This reinforces that adjudication should ordinarily take place after considering the taxpayer’s defence.

10. Useful Proposition for Appeals

A useful proposition emerging from the case is:

“Where the taxpayer raises a plausible defence regarding the genuineness of transactions and availability of ITC, the dispute should be decided on merits after considering documentary evidence rather than being sustained solely on account of non-filing of an initial reply to the Show Cause Notice.”

This is perhaps the strongest takeaway from the judgment for GST appeals involving ITC denial, supplier-related allegations, and challenges to the validity of Show Cause Notices.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Mrs.P.Selvi, learned Government Advocate takes notice for the Respondent.

2. This Writ Petition is being disposed of at the stage of admission itself with the consent of the learned counsel for the Petitioner and the learned Government Advocate for the Respondent.

3.The Petitioner is before this Court challenging the impugned order dated 21.01.2026, whereby the proposal in Show Cause Notice in Form DRC-01 dated 15.07.2025 has been confirmed. By the impugned order, the following demands have been confirmed against the Petitioner in the absence of any reply from the Petitioner:

4. The case of the Petitioner is that the first paragraph of the aforesaid Show Cause Notice in Form DRC-01 dated 15.07.2025, which is accompanied by Summary DRC-01, refers to the tax period 2020-2021. Therefore, the Petitioner was unaware of the details of the period involved.

5. That apart, it is submitted that Input Tax Credit that was availed by the Petitioner was not only reflected in GSTR-2A pursuant to GSTR-01 filed by the supplier but also reflected in GSTR-2B after tax was paid by the supplier viz., M/s.Rabin Traders.

6. It is further stated that office of the Petitioner had visited the Respondent to elicit clarification regarding the discrepancy arising from the reference to the tax period 2020-2021 in the aforesaid Show Cause Notice dated 15.07.2025, and was orally informed that the proceedings will be dropped.

7. The learned counsel for the Petitioner has also produced a copy of the order dated 17.07.2025 passed in response to the Show Cause Notice in Form DRC-01 dated 06.03.2025, whereby, the proceedings initiated by the aforesaid Show Cause Notice dated 06.03.2025 was dropped in the light of Show Cause Notice dated 15.07.2025 issued under Section 74A of the respective GST enactment, which has now culminated in the impugned order.

8. In support of the plea, the learned counsel for the Petitioner has also relied on the decisions of the Division Bench of the Himachal Pradesh High Court and the Allahabad High Court in the following two cases:

a. M/s.Himalayan Communication Pvt., Ltd., vs. Union of India and Others in CWP No.8809 of 2025 dated 06.06.2025

b. Kesarwani Traders vs. State of Uttar Pradesh reported in (2025) 177 com 750 (Allahabad)

9. The learned counsel for the Petitioner has further placed reliance on the following two decisions of this Court:

a. M/s.Opal Energy Solution Private Ltd, Peravurani -614 804 vs. The Commercial Tax Officer, Pattukkottai – Assessment Circle, Pattukkottai in P.(MD)No.7070 of 2014 dated 11.07.2019.

b. M/s.Farwood Industries Limited, rep. by the Managing Director, Neelankarai, Chennai – 600 041 vs. The Assistant Commissioner (CT), Sholinganallur Assessment Circle, Chennai – 600 096 in P.No.20034 of 2015 dated 24.08.2020.

10. The learned counsel for the Petitioner has further placed reliance on the decision of the Hon’ble Supreme Court in the case of The Commissioner Trade and Tax Delhi vs. M/s.Shanti Kiran India (P) Ltd., in Civil Appeal No(s).2042-2047 of 2015, rendered in the context of availability of Input Tax Credit under the previous regime under relevant VAT enactments to state that once input credit has been validly availed, the same cannot be denied if the tax was duly paid by the supplier.

11. The learned counsel for the Respondent, on the other hand, submits that the Show Cause Notice specifically refers to invoices pertaining to the year 2024, in response to which the Petitioner ought to have filed a reply. However, no reply having been filed, the impugned order was passed on 21.01.2026.

12. I have considered the arguments advanced by the learned counsel for the Petitioner and the learned counsel for the Respondent.

13. The Petitioner ought to have filed a reply to the Show Cause Notice dated 15.07.2025 issued under Section 74A of the respective GST enactments. Although there is a typographical error in the first paragraph referring to the tax eriod 2020-2021, the reference in the table to the said Show Cause Notice clearly indicates invoices of the said supplier issued during the period May 2024, as detailed below:

14. It appears that a parallel proceedings were also initiated by another officer from the same Assessment Circle on 06.03.2025, which culminated in the order dated 17.07.2025, wherein, the following order has been passed:

A return scrutiny was made for the year 2024-25 and certain discrepancies were noticed and notice in DRC-01 was issued under section 74 vide reference 2nd cited. For the same issue, a notice has been issued and action is being taken under section 74A in ARN No. AD330725030116G, Dt. 15.07.2025 vide reference 1st cited. Hence duplicate task issued in the reference 2nd cited (DRC-01 ARN No.. AD330325021295H Dated: 06.03.2025) is hereby dropped.

15. The dropping of the demand proposed in Show Cause Notice dated 06.03.2025, vide order dated 17.07.2025, was in the light of the Show Cause Notice dated 15.07.2025, which has culminated in the impugned order.

16. As such, the Respondent cannot be found at fault, and there is no procedural irregularity has been committed by the Respondent while passing the impugned order. It was incumbent upon the Petitioner to have filed a reply to the Show Cause Notice dated 15.07.2025, which has culminated in the impugned order 21.01.2026. Therefore, this writ petition is liable to be dismissed.

17. However, considering the fact that the Petitioner has not filed a reply to the said Show Cause Notice dated 15.07.2025, which has culminated in the impugned order, I am inclined to remit the matter back to Respondent for passing fresh orders on merits.

18. Needless to state, Petitioner shall deposit 10% of the disputed tax, if the Petitioner desires re-adjudication of the matter.

19. In case the petitioner fails to deposit the aforesaid amount within a period of thirty days from the date of receipt of copy of this order and also fails to file the reply to the Show Cause Notice dated 15.07.2025, within the said period, the writ petition shall be deemed to be dismissed, and in such an event, the respondent is at liberty to proceed against the petitioner in accordance with

20. This Writ Petition stands disposed of with the above observations. No Costs. Connected Writ Miscellaneous Petitions are closed.