Calcutta HC: Quashing Adjudication Orders that Bypass Natural Justice

The Calcutta High Court, in WPA 20118 of 2025 with CAN 1 of 2025 (Order dated 27-02-2026), has reinforced a critical procedural safeguard: the right to a personal hearing.

While the Court refused to quash the Show Cause Notice (SCN) itself, it struck down the final Adjudication Order because the department rushed to pass it without letting the taxpayer speak.

The Case Background: ITC Denial & Fake Suppliers

The petitioner, a trader in crude tar, was hit with a notice under Section 74 of the WBGST Act. The department's primary allegation was that the petitioner's suppliers had their registrations cancelled retrospectively due to fraud (Section 29(2)(e)).

The department argued that the entire ITC chain was "circular" and "fraudulent," doubting the genuineness of the transactions despite the petitioner providing invoices and E-way bills.

The Legal Dispute

The petitioner challenged the SCN in a Writ Petition, arguing:

1. Pre-determined Mind: The SCN already concluded they were guilty before hearing them.
2. Sufficiency of Documents: They provided all documents required under Section 16(2) (Invoices, E-way bills, bank statements).
3. Supplier Default: ITC shouldn't be denied to a buyer just because a registered supplier later turns out to be "bogus."

The Judgment: What the Court Decided

Hon'ble Justice Om Narayan Rai analyzed the case on two fronts:

1. Can a Show Cause Notice be quashed? (NO)

The Court held that a Writ Court rarely interferes at the SCN stage.

• The SCN used terms like "prima facie," which indicates the officer is still "inquiring" and hasn't made a final decision.
• Therefore, the SCN did not exhibit a "pre-determined mind." The taxpayer must reply to the notice rather than coming to court prematurely.

2. Can the Adjudication Order stand? (NO)

While the writ petition was pending, the department passed a final Adjudication Order confirming the tax demand.

• The Catch: The department failed to provide the taxpayer with an opportunity for a Personal Hearing.
• The Verdict: The High Court quashed the Adjudication Order entirely. It directed the petitioner to file a fresh reply to the SCN and ordered the department to pass a new order only after a proper hearing.

Key Takeaways for Taxpayers

• Standard of Proof (Section 155): In cases where the department doubts a transaction, just having an invoice or E-way bill might not be enough. The burden of proof shifts to the taxpayer to prove the transaction's genuineness beyond "basic" documents.
• The "Prima Facie" Shield: If an SCN uses the word "prima facie" extensively, it is very difficult to challenge it in a High Court as being "pre-determined." You are better off filing a strong technical reply.
• Don't Pay Immediately: If you receive an ASMT-10 or DRC-01 for head mismatches, do not rush to pay via DRC-03. Instead, cite the WPA 20118 of 2025 (Calcutta HC) case to argue for revenue neutrality and procedural fairness.
• Use GSTR-1A: Ensure you use the newly introduced GSTR-1A amendment features to proactively correct such errors before the department catches them.

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View the original raw text of the judgment here.