Gujarat HC Fines GST Dept ₹1 Lakh Ignoring Rectified Mismatch Costs Heavily
The Gujarat High Court recently imposed a ₹1 lakh cost on the GST department for failing to consider a rectified mismatch in returns — calling it a clear case of “non-application of mind.”
This ruling is a wake-up call for tax officers and relief for honest taxpayers facing harassment over reconciled errors.
Let’s break it down.
What Was the Issue?
- The taxpayer had filed GSTR-1 and GSTR-3B, which showed a mismatch in ITC (Input Tax Credit).
- Upon receiving a show-cause notice, the taxpayer submitted a rectified return with a proper reconciliation.
- Despite this, the GST officer passed an adverse order and demanded tax + penalty, without considering the rectified data.
Key Observations by Gujarat HC
The court noted:
- “Non-application of mind” by the adjudicating authority
- ₹1 lakh cost imposed on the GST officer personally, recoverable from their salary
- Directed the department to re-decide the matter in 4 weeks
Legal Reference:
- Section 75(6) of CGST Act – mandates proper consideration of replies during adjudication
- Case Title: [Name redacted for SEO but available in HC website]
- Ruling Date: May 2025
Why This Matters to Taxpayers
- Taxpayers often face mismatch notices due to system errors or minor differences
- Even after filing rectified returns, officers pass penalty orders mechanically
Expert Insight:
CA Ritesh Shah, Tax Consultant, says:
“This order empowers taxpayers. It puts the onus on officers to actually read and evaluate replies. Filing reconciliations on time can save you not just money but also legal stress.”
What You Should Do in Case of Mismatch Notices
- Download all relevant returns (GSTR-1, GSTR-3B, GSTR-2A/2B)
- Prepare a clear reconciliation sheet
- Reply to SCN with rectified data and supporting documents
Government Must Act
The ruling indirectly urges CBIC and State GST authorities to:
- Issue clear SOPs on handling rectified mismatches
- Ensure officers follow Section 75(6)
- Penalise misuse of power and mechanical orders
FAQ
Q1. What happens if a rectification is ignored in GST SCN cases?
A: The order can be struck down by courts for violating principles of natural justice.
Q2. Can GST officers be fined personally?
A: Yes, as per this Gujarat HC ruling, costs can be imposed on officers individually.
Q3. What section of CGST Act covers this?
A: Section 75(6) – which requires the officer to consider the taxpayer’s reply before passing an order.
Summary
Gujarat HC fined GST officers ₹1 lakh for ignoring rectified mismatch in returns, calling it non-application of mind. The court emphasised due process under Section 75(6) of CGST Act and directed a fresh hearing, offering relief to taxpayers facing mechanical orders.