Telangana High Court Mandates Personal Hearing in GST Appeals; Defers Section 16(2)(c) Constitutional Scrutiny

The intersection of statutory compliance and fundamental rights often creates complex battlegrounds within indirect tax litigation. A recurring grievance among the business community is the mechanical rejection of appeals by tax authorities without affording the affected party a chance to present their case. In a highly significant judicial intervention, the Telangana High Court, through its judgment dated 30.03.2026, in the matter of Rythu Seva Kendram Bairanpally Vs Superintendent of Central Tax, has strongly reinforced the indispensability of natural justice in appellate proceedings.

Furthermore, this ruling touches upon one of the most fiercely debated topics in the current tax regime: the denial of Input Tax Credit (ITC) to a bona fide purchasing assessee due to the tax payment defaults of their suppliers. While addressing the immediate procedural flaws, the Court also laid down a strategic roadmap for assessees looking to challenge the constitutional validity of Section 16(2)(c) and Section 16(2)(aa) of the Central Goods and Services Tax Act, 2017.

Factual Matrix of the Dispute

The legal conflict was triggered when the revenue department initiated actions against the assessee, culminating in an adverse Order-in-Original dated 13.02.2025. This was swiftly followed by the issuance of a demand notice in FORM DRC-07 on 20.02.2025. The core of the department's demand revolved around the disallowance of ITC, invoking the stringent conditions laid down under the GST framework regarding supplier compliance.

Seeking redressal, the assessee escalated the matter to the appellate forum. As mandated by the statute, the assessee fulfilled the pre-deposit requirement on 21.09.2025 to legitimize the appeal. However, prior to this, the department had already initiated coercive recovery measures, successfully attaching the assessee's bank account on 03.09.2025.

The tipping point occurred when the appellate authority summarily dismissed the appeal via FORM GST APL-02 on 13.11.2025. The dismissal was executed without issuing any notice for a personal hearing, prompting the assessee to invoke the writ jurisdiction of the High Court.

Core Contentions Raised by the Assessee

The assessee approached the High Court with a multi-pronged legal strategy, challenging both the procedural irregularities of the appellate authority and the substantive provisions of the GST law itself.