Setting Aside Ex-Parte Orders: Opportunity to Reconcile GSTR-3B vs. 2A Discrepancies

By | May 6, 2026
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Setting Aside Ex-Parte Orders: Opportunity to Reconcile GSTR-3B vs. 2A Discrepancies

Facts

  • The Period: The dispute involved two separate assessment years: 2020-21 and 2021-22.

  • Year 2020-21: The Adjudicating Authority noticed a discrepancy between the Input Tax Credit (ITC) claimed in GSTR-3B and the credit available in GSTR-2A. Since the petitioner failed to file a reply, the authority passed an ex-parte order confirming the demand.

  • Year 2021-22: A similar ex-parte order was passed without a reply from the petitioner. However, for this year, the petitioner also challenged the validity of the audit procedure conducted under Section 65 prior to the issuance of the Show Cause Notice (SCN).

  • Assessee’s Defense: The petitioner argued a breach of natural justice, asserting they possessed the necessary documentation to reconcile the discrepancies and had been deprived of an opportunity to present their case.

Decision

  • Final Verdict: In favour of the Assessee (Matter Remanded).

  • Ratio Decidendi:

    • Natural Justice: The Court held that since the orders for both years were passed ex-parte without any representation from the taxpayer, the principles of natural justice were compromised.

    • Substantive Rights vs. Procedural Lapses: The Court acknowledged the petitioner’s claim that the alleged discrepancies between GSTR-3B and GSTR-2A were reconcilable with physical records.

    • Conditional Relief: To balance the interest of the Revenue while granting the petitioner a second chance, the Court set aside the orders and remitted the matters back to the stage of “Reply to SCN,” subject to the petitioner depositing 10% of the disputed tax demand.

    • Audit Validity: The contentions regarding the audit procedure for 2021-22 were left open to be addressed during the fresh adjudication.

Key Takeaways

  • Reconciliation is Key: Discrepancies between GSTR-3B and 2A are a primary trigger for notices. This ruling confirms that if a taxpayer has the material to prove the genuineness of ITC, Courts are likely to grant an opportunity even if the initial deadlines were missed.

  • The Cost of Remand: While the Court provided relief, the “10% Pre-deposit” serves as a financial deterrent for non-compliance during original proceedings. Professionals should advise clients that ignoring SCNs leads to cash flow blockages even if they eventually win a remand.

  • Audit Procedure Challenges: If the proper procedure for an audit (under Section 65) is not followed before issuing an SCN, it constitutes a valid ground to challenge the subsequent demand order.

  • Active Monitoring: To avoid ex-parte situations, businesses must ensure that the “Dashboard” on the GST Portal is monitored regularly, as “noticing a discrepancy” often starts with an automated system alert that requires a timely manual response.

HIGH COURT OF KARNATAKA
Pathways Marketing and Consulting Group
v.
Assistant Commissioner of Commercial Tax*
S Sunil Dutt Yadav, J.
WP No. 9621 of 2026 (T-RES)
APRIL  2, 2026
Pranay Sharma Y., Adv. for the Petitioner. K. Hemakumar, AGA for the Respondent.
ORDER
1. Petitioner has called in question the correctness of the order of adjudication at Annexure-A1 for the year 2020-21 as well as the order of adjudication at Annexure-B1 for the year 2021-22.
2. Various contentions have been raised while challenging the orders.
3. Insofar as Annexure-A1 is concerned, it is submitted that the order passed is an ex-parte order and the Authority has completed adjudication on the premise that there was discrepancy between GSTR-3B and GSTR-2A. It is the case of the petitioner that if an opportunity is granted, the petitioner would demonstrate that no such discrepancy exists.
4. Perused the order of the adjudication at Annexure-A1. The authority has completed the adjudication, noticing the discrepancy between GSTR-3B and GSTR-2A. The order also observes that despite sufficient opportunity granted, the taxpayer has not made out his reply.
5. Taking note that the order passed is an ex parte order and the stand of the petitioner that he has material to demonstrate that the discrepancy as pointed out does not exist, it would be appropriate to set aside the order at Annexure-A1.
6. Accordingly, the order at Annexure-A1 is set aside. The matter is remitted to the stage of reply to the show cause notice.
7. Petitioner is put on terms and directed to pay 10% of the tax demand, insofar as the proceedings at Annexure-A1 is concerned. Petitioner to appear before respondent No.1 without further notice on 04.05.2026. All contentions are kept open
8. Insofar as the adjudication order at Annexure-B1 for the year 2021-22 is concerned, petitioner submits that the order passed is an ex-parte order without the benefit of any reply on behalf of the petitioner. Petitioner submits that there are several grounds to assail the validity of the proceedings and further submits that there has been violation of principles of natural justice insofar as notice prior to audit is less than the time stipulated under Section 65(3) of the CGST Act. Certain other contentions have been raised as well.
9. Perused the order at Annexure-B1. Noticing that the order passed is an ex-parte order without the benefit of any reply to the show cause notice and noticing the contentions raised by the petitioner regarding the validity of the procedure before conducting audit, it would be appropriate to set aside the order at Annexure-B1.
10. Accordingly, the order at Annexure-B1 is set aside. The matter is remitted to the stage of reply to the show cause notice.
11. Petitioner is put on terms and directed to pay 10% of the tax demand, insofar as the proceedings at Annexure-B1 is concerned. Petitioner to appear before respondent No.2 without further notice on 04.05.2026. All contentions are kept open.
12. Accordingly, petition is disposed of.