Safiya Malik

The High Court of Kerala Single Bench of Justice Ziyad Rahman A.A. quashed the assessment order denying input tax credit and directed the State Tax Officer to reconsider the issue after granting the dealer a proper personal hearing. The case concerned allegations of discrepancies in transactions forming the basis for proceedings under Section 74 of the CGST/KSGST Act for the 2017–18 period. The Court noted deficiencies in the show-cause notice and held that an affidavit submitted by a professional such as a Cost Accountant during the hearing cannot be disregarded when the tax authority itself acknowledges aspects mentioned in it. The officer must now provide the petitioner an effective opportunity to produce material before issuing a fresh decision.

The petitioner, a registered dealer under the CGST/KSGST Act, challenged an order passed under Section 74 relating to the 2017–18 assessment year. The proceedings began when the petitioner received a show-cause notice outlining alleged discrepancies in certain transactions. The petitioner responded in writing, submitting explanations and supporting documents.

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During the personal hearing, the petitioner’s authorised representative, a cost accountant, stated in an affidavit that he was directed to present documents before a subordinate staff member rather than the assessing officer. He asserted that no substantive hearing took place before the officer who later issued the final order.

The petitioner contended that the show-cause notice lacked specific details regarding the allegations, which limited the ability to address the issues effectively. It was also argued that the order subsequently issued contained particulars that were not disclosed earlier.

The State Tax Officer filed a counter affidavit, acknowledging that the representative was asked to appear before another officer for document verification but maintaining that the representative was later heard. The counter affidavit also addressed the petitioner’s objections and supported the initiation of proceedings under Section 74 of the CGST/KSGST Act.

The Court recorded that the petitioner’s case was that “the petitioner was not given proper opportunity for hearing” and that the authorised representative was directed to appear before a clerk. It further recorded the contention that the show-cause notice contained vague grounds: “the specific reasons which prompted the 3rd respondent to invoke the said provision for declining the input tax credit, were not furnished to the petitioner”.

Examining the counter affidavit, the Court noted that it was “averred… that, when the authorized representative… appeared for hearing, he was directed to appear before one Mr. Mukesh… for verification of the documents and invoices. Thereafter the 3rd respondent heard the petitioner”. It recorded that the officer “denied specific contentions”.

Referring to the petitioner’s supporting affidavit, the Court stated that the authorised representative had “specifically asserted that on 30.01.2025, he appeared before the State Tax Officer… for a personal hearing. When he appeared before the officer, he was directed to appear before the personal staff/clerk named Sri. Mukesh”. The affidavit further asserted that “a proper hearing was not effected and instead, a subordinate officer… simply collected the files and obtained the details of the client”.

The Court observed that the counter affidavit admitted the direction to appear before a subordinate officer, but sought to explain it as limited to verification of documents. The Court then stated: “when a professional, swears an affidavit before this Court highlighting the matters that transpired during the course of hearing, the same cannot be simply ignored, particularly in a situation where, to some extent, there is an admission forthcoming”.

Regarding vagueness of the show-cause notice, the Court observed: “I find some force in the said contention”. It noted that although clause (II) of the notice mentioned brief facts and referred to the transactions in dispute, “the further details in respect of the same are not revealed”. By contrast, the Court recorded that in the impugned order “the details of the allegations are specifically highlighted”. It then noted the petitioner’s claim that had these details been furnished in the notice, “they could have contested the matter more effectively”.

After reviewing the notice and final order, the Court recorded: “I am of the view that, the said contention of the petitioner cannot be simply ignored”. It concluded that “in the light of the violation of principles of natural justice… and also in the light of the vagueness in Ext.P2 show cause notice, the matter requires reconsideration”.

The Court stated: “In such circumstances, this writ petition is disposed of quashing Ext.P5, with a direction to the 3rd respondent, to reconsider the matter after giving the petitioner an opportunity for being heard.”

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“It shall be open to the petitioner to produce additional documents, in respect of the matters referred to in Ext.P5 order. Fresh order, as directed above, shall be passed within a period of three months from the date of receipt of a copy of this judgment.”

Advocates Representing the Parties

For the Petitioners: Sri. P.N. Damodaran Namboodiri; Shri. Hrithwik D. Namboothiri; Shri. A. Kumar (Senior Advocate)
For the Respondents: Smt. Preetha S. Nair; Sri. Arun Ajay Shankar (Government Pleader)

Case Title: M/s. Ridha Polymers v. State of Kerala & Others
Neutral Citation: 2025: KER:83772
Case Number: WP(C) No. 17324 of 2025
Bench: Justice Ziyad Rahman A.A.