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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesThe Gauhati High Court has refused to quash a GST show-cause notice issued over an alleged input tax credit (ITC) mismatch between a taxpayer’s records and GSTR-2A. The Division Bench held that the company’s evidence and legal defence must be considered by the proper officer during adjudication; it did not decide whether the company was ultimately entitled to the disputed credit.
What the Gauhati High Court decided
In M/s Surya Business Private Limited v. State of Assam and Others, WA/321/2026, the Division Bench dismissed the company’s appeal and affirmed the single judge’s refusal to interfere with a show-cause notice under Section 73(1) of the Assam Goods and Services Tax Act. The judgment, neutral citation 2026:GAU-AS:13966-DB, was delivered on 22 September 2026 by Chief Justice Ashutosh Kumar and Justice Arun Dev Choudhury. The oral judgment was authored by Justice Choudhury.
The ruling is about the stage at which the dispute should be examined. A notice initiates proceedings; it is not a final adjudication of liability. The court said the company could establish its defence before the proper officer, who would consider the factual record and applicable legal arguments.
How the dispute arose
Surya Business Private Limited, which does business in Jorhat, was selected for an audit under Section 65 of the Assam GST Act for financial year 2018–19. An audit observation dated 13 December 2023 alleged excess ITC of approximately ₹27.25 lakh. The stated basis was that invoices for certain inward supplies from registered supplier M/s Atikur Rahman were not reflected in the company’s GSTR-2A.
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The company responded to the audit observation on 17 December 2023. It said it held valid tax invoices, had received the goods, and had paid the supply value, including tax, through banking channels. It also argued that GSTR-2A was a facilitating mechanism and could not, by itself, justify denying ITC. In support, it cited Union of India v. Bharti Airtel Ltd., CBIC communications and other decisions. These were the company’s submissions, not findings by the court that the transactions met every statutory condition for claiming credit.
An audit report in Form GST ADT-02 followed on 8 January 2024. On 11 January 2024, the department issued the Section 73(1) show-cause notice proposing recovery of the disputed ITC, with interest and penalty.
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Why the court left the defence to adjudication
The Bench accepted that ITC entitlement should not be decided merely by looking at one electronic statement without considering the applicable statutory conditions. But it held that a challenge to the notice was not the point at which to determine the company’s final entitlement. Questions including whether the company actually paid GST to its supplier and whether the supplier filed relevant returns could be examined by the proper officer.
The court did not regard the company’s asserted documents, the absence of a counter-affidavit, or its argument that proceedings should first have been taken against the supplier as grounds making the notice itself jurisdictionally invalid. The possibility that the taxpayer may eventually succeed in adjudication does not, by itself, invalidate the start of proceedings.
As the judgment put it, “The defense of the appellant against the proposed demand, as noted hereinabove, is a matter which the appellant is entitled to establish before the proper officer.” The opportunity to present a defence is therefore central to the ruling: the court declined to decide the merits at the notice stage, rather than deciding them against the company.
What happened to the company’s opportunity to reply
The company had challenged the notice in writ proceedings, and an interim order dated 5 February 2024 restrained further proceedings while that case was pending. On 10 August 2026, the single judge declined to quash the notice, allowed the company to file a reply within 30 days, and permitted it to raise its contentions before the proper officer. The Division Bench affirmed that judgment in its entirety. The 30-day opportunity was part of this case’s order; it should not be treated as a general deadline applicable to other taxpayers.
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What the decision does—and does not—mean for taxpayers
- It does mean: in this case, the taxpayer’s dispute over the notice was not a substitute for presenting its factual and legal case in statutory adjudication. The proper officer is to consider that defence.
- It does not mean: the High Court ruled that a GSTR-2A mismatch can never support an ITC demand, or that invoices and bank payments automatically establish eligibility.
- It also does not mean: the company has already won its ITC claim. The final merits were left open.
For a business facing a similar notice, the practical distinction is between contesting the initiation of proceedings and substantiating entitlement in the proceeding itself. This judgment addresses the former in the circumstances of one appeal; it does not determine the outcome of other taxpayers’ disputes, which depend on their facts and applicable law.
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