Gujarat High Court Quashes GST Demand Order for Violation of Natural Justice — Personal Hearing Not Granted Despite Reminders Under Section 75(5) of GST Act. Failure to Provide Personal Hearing Before Confirming ITC Reversal Demand Renders Order Invalid; Matter Remanded for Fresh Adjudication.

High Court: Gujarat High Court In Favour of Accused

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2026-05-19 18:30:58

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Case Note & Summary

The petitioner, Aarti Enterprise through Savitaben Brindavan Agarwal, filed a writ petition challenging a system-based notice in Form DRC-01A dated 09.11.2024 issued by respondent No. 2 for the Financial Year 2020-21, alleging short reversal of Input Tax Credit (ITC) under Section 17(2) of the Gujarat State Goods & Service Tax Act, 2017 read with Rule 42 of the Gujarat Goods & Service Tax Rules, 2017. The notice assumed that the entire ITC availed during the period was common ITC and proportionate reversal was required. The petitioner claimed that due to his accountant being diagnosed with cancer, he could not respond to the notice. The respondent issued reminders on 31.12.2024, 08.01.2025, and 17.01.2025, but the petitioner remained unaware. Subsequently, an order along with Form DRC-07 dated 05.02.2025 was passed confirming the demand. The petitioner argued that the impugned order violated principles of natural justice and Section 75(5) of the GST Act, as no personal hearing was granted despite reminders. The court, after hearing both sides, found that the respondent failed to provide a personal hearing, which is mandatory under Section 75(5). The court set aside the impugned order and directed the respondent to issue a fresh notice and provide a reasonable opportunity of hearing, including a personal hearing, to the petitioner. The petition was allowed with no order as to costs.

Headnote

A) GST - Input Tax Credit Reversal - Natural Justice - Section 75(5) of Gujarat State Goods & Service Tax Act, 2017 - The petitioner was issued a notice in Form DRC-01A dated 09.11.2024 for short reversal of ITC under Section 17(2) read with Rule 42. Despite reminders, no personal hearing was granted before passing the order dated 05.02.2025. The court held that the failure to grant personal hearing violates Section 75(5) and principles of natural justice, and set aside the order with liberty to the respondent to issue fresh notice and provide a reasonable opportunity of hearing. (Paras 1-5)

Issue of Consideration

Whether the impugned order confirming demand of short reversal of Input Tax Credit is vitiated for violation of principles of natural justice and Section 75(5) of the GST Act, 2017

Final Decision

The court allowed the petition, set aside the impugned order dated 05.02.2025, and directed the respondent to issue a fresh notice and provide a reasonable opportunity of hearing, including a personal hearing, to the petitioner. No order as to costs.

Law Points

Principles of natural justice
mandatory personal hearing under Section 75(5) of the Gujarat State Goods & Service Tax Act
2017
reversal of Input Tax Credit under Section 17(2) read with Rule 42 of SGST Rules

Case Details

2026:GUJHC:5876-DB

R/Special Civil Application No. 17409 of 2025

2026-01-22

Honourable Mr. Justice A.S. Supehia, Honourable Mr. Justice Pranav Trivedi

2026:GUJHC:5876-DB

Mr. Abhay Y. Desai for the Petitioner, Ms. Nimisha Parekh, Assistant Government Pleader for the Respondents

Aarti Enterprise through Savitaben Brindavan Agarwal

The State of Gujarat & Anr.

Nature of Litigation

Writ petition challenging a system-based notice and order confirming demand of short reversal of Input Tax Credit under GST laws.

Remedy Sought

Petitioner sought quashing of the notice dated 09.11.2024 and order dated 05.02.2025, and a direction for fresh adjudication with personal hearing.

Filing Reason

The petitioner alleged violation of principles of natural justice and Section 75(5) of the GST Act as no personal hearing was granted before passing the order.

Issues

Whether the impugned order confirming demand of short reversal of Input Tax Credit is vitiated for violation of principles of natural justice and Section 75(5) of the GST Act, 2017

Submissions/Arguments

Petitioner argued that the impugned notice and order were in violation of principles of natural justice and Section 75(5) of the GST Act, as no personal hearing was granted despite reminders. Respondent argued that the petitioner was given sufficient opportunity through reminders but failed to respond.

Ratio Decidendi

The failure to grant a personal hearing before passing an order confirming demand under GST violates Section 75(5) of the Gujarat State Goods & Service Tax Act, 2017 and principles of natural justice, rendering the order invalid.

Judgment Excerpts

The impugned notice is in violation of principles of natural justice and is also in violation of provisions of Section 75(5) of the G.S.T Act, as though the petitioner was issued the reminders, however, they never intimated the date of personal hearing.

Procedural History

The petitioner received a system-based notice in Form DRC-01A dated 09.11.2024 for short reversal of ITC. Reminders were issued on 31.12.2024, 08.01.2025, and 17.01.2025. An order in Form DRC-07 dated 05.02.2025 was passed confirming the demand. The petitioner filed the present writ petition challenging the notice and order.