Lupin Ltd. Archives

Budgetary Support Recovery Order Set Aside For Fresh Reconsideration Due To Failure To Issue Reasoned Order

Issue

Whether an order confirming the recovery of alleged excess budgetary support with interest and adjusting subsequent refunds is legally sustainable when the authority fails to examine the assessee’s reconciliation statements regarding ITC availability and passes an unreasoned order without evaluating submitted evidence.

Facts

Scheme & Claim: The petitioner was covered under the Budgetary Support Scheme of DIPP for the period July 2017 to March 2018 and was granted sanction for budgetary support based on Central Tax and Integrated Tax paid in cash after ITC utilization.
Recovery Proceedings: The Department subsequently alleged that the petitioner claimed excess budgetary support and confirmed the recovery of the excess amount along with interest via an Order-in-Original, while also adjusting refunds due for subsequent periods.
Petitioner’s Explanation: The petitioner submitted detailed reconciliation statements, tax invoices, and account details to demonstrate that the ITC reflected in Form GSTR-2A was either ineligible or practically unavailable for utilization, and that an inadvertent disclosure in Table 8C of Form GSTR-9 was misconstrued by the Department.
Failure to Consider: The adjudicating authority confirmed the demand without properly evaluating the petitioner’s evidence or providing reasoned conclusions for rejecting the explanations and reconciliations submitted.

Decision

Duty to Reason: The core issue was whether the ITC reflected in GSTR-2A was legally available and capable of utilization. When the petitioner submitted accounts and invoices to explain discrepancies, the respondents were legally bound to consider them and record specific reasons for acceptance or rejection.
Lack of Due Application of Mind: The required analytical exercise and evaluation of submitted materials were not properly undertaken by the adjudicating authority.
Orders Set Aside & Remanded: The impugned orders confirming the recovery and adjusting refunds were set aside, and the matter was remanded to the authority for fresh reconsideration after providing an effective hearing and issuing a reasoned order addressing each submission. (In favour of assessee / Matter remanded)

Key Takeaways

Mandate for Reasoned Orders: Under Section 75 of the CGST/SGST Act, 2017, adjudicating authorities must pass speaking orders that deal specifically with each explanation, invoice, and reconciliation submitted by the assessee.
GSTR-2A Availability vs. Actual Eligibility: Merely pointing to credit reflected in Form GSTR-2A or Form GSTR-9 Table 8C is insufficient to establish that ITC was legally available or usable for determining cash liability under budgetary schemes.
Natural Justice in Recovery Actions: Summary rejection of reconciliation evidence or recovery of DIPP budgetary support without dealing with the assessee’s factual defenses violates principles of natural justice and invalidates consequential refund adjustments.

HIGH COURT OF SIKKIM

Lupin Ltd.

Union of India

A. Muhamed Mustaque, CJ.

WP(C) No. 24 of 2025

SEPTEMBER 23, 2026

Prakash Shah, Sr. Adv. and Ms. Menuka Gurung, Adv. for the Petitioner. Ms. Sangita Pradhan, Dy. Solicitor General of India, Ms. Sittal Balmiki and Amit Kumar Sharma, Advs. for the Respondent.

JUDGMENT

1. The matter pertains to the alleged excess budgetary support received by the Petitioner, Lupin Limited, under the Budgetary Support Scheme notified by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industries, Government of India. Vide Notification dated 05.10.2017. The Petitioner Company is covered by the said Scheme and is entitled to budgetary support in accordance with the terms thereof. The issue in the present matter relates to the period from July 2017 to March 2018.

2. As per the Budgetary Support Scheme, goods manufactured by the Petitioner would be eligible for budgetary support to the extent of 58% of the Central Tax paid through debit in the cash ledger account and 29% of the Integrated Tax, paid through debit in the cash ledger account, after utilization of the eligible Input Tax Credit (ITC).

3. Based on the records, the Petitioner was granted budgetary support amounting to Rs. 12,48,27,999/- against its claim of Rs. 12,63,99,662/- for the period July 2017 to March 2018.

4. Thereafter, the Respondents alleged that the Petitioner had received excess budgetary support and initially sought recovery of Rs. 41,64,578/- (Rupees forty-one lakhs sixty-four thousand five hundred and seventy-eight only).

5. The Petitioner then approached this Court by filing Lupin Ltd. v. Union of India [2024] 81 GSTL 366 (SIKKIM)/W.P(C) No. 46 of 2022. This Court by order dated 19.05.2023, directed the Respondents to examine the additional documents furnished by the Petitioner and thereafter, by order dated 20.11.2023, permitted the Respondents to re-examine the recovery. Pursuant thereto, verification was conducted and the alleged excess amount was revised to Rs. 37,93,159/- (Rupees thirty-seven lakhs ninety-three thousand one hundred and fifty-nine only).

6. The Petitioner then filed the instant Writ Petition challenging the Order-in-Original dated 07.01.2025 passed by the Assistant Commissioner, Central Goods and Service Tax (CGST), Government of India, Gangtok Division and the consequential adjustment order dated 10.03.2025. The impugned orders challenged by the Petitioner confirmed recovery of the alleged excess budgetary support amounting to Rs. 37,93,159/- (Rupees thirty-seven lakhs ninety-three thousand one hundred and fifty-nine only) along with interest at the rate of 15% per annum. Subsequently, an amount of Rs. 75,40,592/- (Rupees seventy-five lakhs forty thousand five hundred and ninety-two only), was adjusted from the refund otherwise payable to the Petitioner for the period April to June, 2024.

7. The short point for consideration is whether the Petitioner’s explanation and supporting documents were properly considered by the Respondents and whether adequate reasons were recorded while rejecting the same. The Petitioner’s case is that it had inadvertently disclosed a certain amount in Table 8C of GSTR-9 and that such inadvertent disclosure was the reafter relied upon to conclude that the Petitioner had received excess budgetary support for the period in question.

8. The question that required consideration was whether the ITC reflected in GSTR-2A was in fact legally available and capable of being utilized by the Petitioner. The Petitioner was required to explain the discrepancy by way of reconciliation statements, invoices and relevant account details. If such explanations were supported by the necessary materials demonstrating that the ITC reflected in GSTR-2A was not actually eligible or available for utilisation, the Respondents were required to consider those explanations and record the documents relied on and reasons for accepting or rejecting the same in a reasoned order.

9. This Court finds that such an exercise was not properly undertaken in the present matter. In such circumstances, one further opportunity ought to be given to the Petitioner to demonstrate, with supporting documents, the basis on which the ITC reflected in GSTR-2A had arisen and why such ITC was not available for utilisation.

10. In such circumstances, in order to afford an opportunity to the Petitioner, it is appropriate that the impugned orders be set aside and this Court directs the Respondents to reconsider the matter afresh after affording an effective opportunity of hearing to the Petitioner.

11. It is made clear that the Petitioner shall demonstrate, by producing the necessary documents, why the ITC reflected in GSTR-2A was not available for utilisation and the Respondents are directed to consider each of such explanations and supporting documents and deal with the same by recording reasons in the final order to be passed.

12. With the above directions, the W.P.(C) No. 24 of 2025 stands disposed of.

13. Needful shall be done within a period of two months.

]]>