In a recent order dated February 2, 2026, the Odisha High Court addressed a dispute involving M/s. Shree Bharat Motors Limited and the Chief Commissioner of CT & GST, Odisha, among others. The case arose from a GST audit for the financial year 2020-21, which led to proceedings under Section 73 of the GST Act. The authorities alleged that the company claimed excess Input Tax Credit (ITC) in its GSTR-3B returns compared to GSTR-2A, primarily due to credit notes issued by suppliers.
The department subsequently issued an order demanding tax, interest, and penalties, asserting that the ITC needed to be reversed. In response, M/s. Shree Bharat Motors Limited filed a rectification application under Section 161, presenting reconciliation statements to demonstrate that the ITC had already been adjusted, negating any excess claims. However, this rectification application was rejected without reviewing the reconciliation records or providing a personal hearing.
Read More: GST - Allahabad High Court: Time spent pursuing a rectification application or remedy before a wrong forum must be excluded while computing limitation for GST [Order attached]
The core issue was whether the rejection of the rectification application without proper verification and without a hearing was legally justified. The Court found that the rectification authority had dismissed the application without examining the available data or providing reasons. This failure to offer a hearing violated the principles of natural justice. Consequently, the Court deemed the rejection order legally unsound and remanded the matter for reconsideration, emphasizing the need for a thorough review of the submitted evidence.
Parties : M/s. Shree Bharat Motors Limited Vs The Chief Commissioner of CT & GST, Odisha and others
Order Date - 02 February 2026
Facts -
- M/s. Shree Bharat Motors Limited was subjected to a GST audit for FY 2020–21, after which proceedings under Section 73 were initiated alleging excess ITC claimed in GSTR-3B compared to GSTR-2A due to credit notes.
- The department passed an order raising tax, interest, and penalty, stating that ITC reversal was required for credit notes issued by suppliers.
- The petitioner filed a rectification application under Section 161, explaining through reconciliation statements that ITC had already been netted off and no excess credit was claimed.
- The rectification application was rejected without examining portal data, reconciliation statements, or granting a personal hearing.
Issue -
- Whether rejection of a rectification application without verifying reconciliation records and without hearing the taxpayer is legally sustainable?
Order -
- The Court noted that detailed reconciliation statements and explanations were already submitted and available on the GST portal.
- The rectification authority rejected the application mechanically, without assigning reasons or verifying records.
- Denial of an opportunity of hearing amounted to violation of principles of natural justice.
- The rejection order was held to be legally infirm and was set aside, with the matter remanded for fresh consideration.
