Input Tax Credit -Relevant Judgments

Hon'ble Panjab and Hariyana High Court in the case of Rajnandini Metal Ltd Vs Union of India and Others (CWP No. 26661 of 2021 (O&M))

Held that there should be reasons to believe that credit of input tax available in the Electronic Credit Ledger has been fraudulently availed or the assessee is ineligible. Reasons have to be recorded by the proper officer and a speaking order shall be passed. 

Posted on :12/07/2022

Hon'ble Madras High Court in the case of M/S. D.Y. BEATHEL ENTERPRISES VERSUS THE STATE TAX OFFICER (DATA CELL) , (INVESTIGATION WING) COMMERCIAL TAX BUILDINGS, TIRUNELVELI, (2021), 

where it was held that, "When it has come out that the seller has collected tax from the purchasing dealers, the omission on the part of the seller to remit the tax in question must have been viewed very seriously and strict action ought to have been initiated against him. In the case on hand, the respondent does not appear to have taken any recovery action against the seller / Charles and his wife Shanthi, on the present transactions. 

Thus, the impugned order suffers from certain fundamental flaws. It has to be quashed for more reasons than one. a) Non-examination of Charles in the enquiry b) Non-initiation of recovery action against Charles in the first place Parallelly, the respondent will also initiate recovery action against Charles and his wife Shanthi." The facts of the case are as such that the petitioners/assessee, being raw rubber sheets traders, had purchased goods from suppliers, namely, Charles and his wife Shanthi. A substantial portion of the sale consideration was only paid through banking channels and the payments made by the petitioners to the supplier included the GST component as well. 

Thereafter, relying on the GST returns filed by the suppliers, the assessee had availed ITC of the GST paid by them. Subsequently, on an inspection by the GST Department, it was discovered that the suppliers had defaulted in payment of output tax collected from the assessee. 

The Department without taking any action of recovery of tax from the defaulting suppliers, issued a SCN to the assessee and passed an order imposing the demand of entire output tax on the assessee. 

The said Court stated that the default in payment of output tax liability by the suppliers should not only have been viewed extremely seriously but also strict action of recovery proceedings should have been initiated against such suppliers. 

In the above judgment it should be noted that the Hon'ble High Court has acknowledged the reliance by the assessee on the Press Release issued by the Central Board of GST council on 4.5.2018, wherein, it has been mentioned that there shall not be any automatic reversal of ITC from the buyer on non-payment of tax by the seller. 

In case of default in payment of tax by the seller, recovery shall be made from the seller. However, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by the supplier or the supplier not having adequate assets etc.

That the 28th GST Council meeting dated 21.7.2018, wherein it was mentioned that "There would be no automatic reversal of input tax credit at the recipient's end where tax had not been paid by the supplier. Revenue administration shall first try to recover the tax from the seller and only in some exceptional circumstances like missing dealer, shell companies, closure of business by the supplier, input tax credit shall be recovered from the recipient by following the due process of serving of notice and personal hearing."

Posted on :12/05/2022

Hon'ble Calcautta High Court in the case of M/s.Sanchita Kundu Vs Assistant Commissioner of State Tax .

Thar the petitioners in these writ petitions are that the transactions in question are genuine and valid by relying upon all the supporting relevant documents required under law and contend that petitioners with their due diligence have verified the genuineness and identity of the suppliers in question and more particularly the names of those suppliers as registered taxable person were available at the Government portal showing their registrations as valid and existing at the time of transactions in question and petitioners submit that they have limitation on their part in ascertaining the validity and genuineness of the suppliers in question and they have done whatever possible in this regard and more so, when the names of the suppliers as a registered taxable person were already available with the Government record and in Government portal at the relevant period of transaction, petitioners could not be faulted if the suppliers appeared to be fake later on. 

Petitioners further submit that they have paid the amount of purchases in question as well as tax on the same not in cash and all transactions were through banks and petitioners are helpless if at some point of time after the transactions were over, if the respondents concerned finds on enquiries that the aforesaid suppliers (RTP) were fake and bogus and on this basis petitioners could not be penalised unless the department/ respondents establish with concrete materials that the transactions in question were the outcome of any collusion between the petitioners/purchasers and the suppliers in question. 

Petitioners further submit that all the purchasers in question invoices-wise were available on the GST portal in form GSTR-2A which are matters of record. Considering the facts as recorded, without any further verification it cannot be said that that there was any failure on the part of the petitioners in compliance of any obligation required under the statute before entering into the transactions in question and that there was no verification of the genuineness of the suppliers in question by the petitioner during the relevant period. 

Petitioners in support of their contention have relied on unreported judgment of this Court dated 13th December, 2021 in a similar case in the case of M/s. LGW Industries Limited & Ors. Vs. Union of India & Ors. in W.P.A No.23512 of 2019. 

Considering the submission of the parties and on perusal of records available, these writ petitions are disposed of by setting aside the aforesaid impugned orders and remanding these cases of the petitioners to the respondents officer concerned to consider afresh on the issue of their entitlement of benefit of input tax credit in question by considering the documents which the petitioners intend to rely in support of their claim of genuineness of the transactions in question and the respondent concerned shall also consider as to whether payments on purchase in question along with GST were actually paid or not to the suppliers (RTP) and also to consider as to whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and also to consider as to compliance of statutory obligation by the petitioners in verification of identity of the suppliers (RTP). 

If it is found upon verification and considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration as to whether facts of the petitioners are similar to the judgements of the Supreme Court and various High Courts and of this Court upon which petitioners intend to rely and if it is found similar to the present case in that event the petitioners shall be given the benefit of input tax credit in question.

These cases of the petitioner shall be disposed of by the respondents concerned in accordance with and in the light of observation made above and by passing a reasoned and speaking order after giving effective opportunity of hearing to the petitioners, within eight weeks from the date of communication of this order. 

These Writ Petitions being WPA No.7231 of 2022 and WPA No.7232 of 2022 are disposed of in the light of observation and directions as made above. In view of setting aside the impugned adjudication orders, impugned orders being Annexure P-10 also stands set aside.

Posted on:17/06/2022

Hon'ble Karnataka High Court in the case of  Wipro Limited India Vs. Union of India and others- (WP-16175 of 2022 (T-RES)

 I am of the considered opinion that it would be just and proper to dispose of this petition directing the respondents 1 to 3 – revenue to follow the procedure prescribed in the Circular and apply the said Circular to the facts of the instant case of the petitioner, 5th respondent and their transactions for the years 2017-18, 2018-19 and 2019-20. It is also necessary to state that though the Circular refers only to the years 2017-18 and 2018-19, since there are identical errors committed by the petitioner not only in respect of the assessment years 2017-18 and 2018-19 but also in relation to the assessment year 2019-20 also, I am of the view that by adopting a justice oriented approach, the petitioner would be entitled to the benefit of the Circular for the year 2019-20 also.”

Petition is hereby disposed of directing the respondents 1 to 3 to take necessary steps in relation to the petitioner and 5th respondent for the assessment years 2017-18, 2018-19 and 2019-20 in terms of the Circular No. bearing No.183/15/2022-GST dated 27.12.2022.

(ii) The respondents 1 to 3 are hereby directed to consider the request made by the petitioner vide letter at Annexure-D dated 06.09.2021 and proceed further in accordance with law and in terms of the Circular dated27.12.2022 as expeditiously as possible.

Posted on:16/03/2023

Hon'ble Kerala High Court in the case of  Diya Agencies Vs. State Tax Officer - (WP-29769 of 2023)

 Claiming Input Tax Credit (ITC) under Section 16(2)(c) of the CGST Act, 2017.

It sheds light on the crucial issue of ITC denial based on non-reflection in GSTR 2A and its impact on taxpayers. Facts of the Case: In this case, the petitioner had  claimed ITC for a sum of  Rs.1,04,376.08 as CGST & SGST.

It was rejected stating that it was not reflected in GSTR 2A.

Aggrieved by the order, the Petitioner challenged it by filing Writ Application in the High Court of Kerala. Legal Provision: Sec.16 2 (c) of CGST Act, 2017, “subject to the provisions of [1]section 41 [2], the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and”

Submission of the Petitioner:

1. The ITC cannot be denied on the ground of not appearing in GSTR 2A as it is not under the control of the Petitioner. The Assessing authority is required to do examination of the the credits availed by the taxpayer.

2. The petition relied on Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax, & The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited and placed that for allowing ITC, the purchasing dealer has to prove the genuineness of the transactions as the burden of proof rests with him while claiming ITC.

3. The petitioner has fulfilled the conditions specified u/s 16(2) of the CGST Act. Despite fulfilling the conditions, the petitioner cannot be asked to pay the ITC,  due to non payment of taxes by the supplier.

 4. Further, reference of CBIC Press Release, was drawn which clarified, furnishing of outward supply in GSTR 1 by the supplier and the facility to view the same in GSTR 2A by the recipient are for facilitation purpose only.  It doesn’t impact the availment of ITC.

5. The petitioner counsel relied on the Union of India (UOI) v. Bharti Airtel Ltd. And Others reported in 2022 (4) SCC 328, wherein, it was held that, GSTR2A is a facilitator to confirm availment of ITC while making self-assessment tax.

6. The Assessing Authority before denying the credit, should have taken action against the selling dealer if the taxes are not paid by the seller.

The Suncraft Energy Private Limited and Another, Calcutta High Court case was relied upon, wherein, “unless and until the Assessing Authority is able to bring out the exceptional case where there has been collusion between the buyer and seller or the dealer is missing or he has closed down its business or he does not have any assets and such other contingencies,  the Assessing Authority, straight away  is not justified in directing the registered person to reverse the input tax credit.”

Held:

1. The assessment order denying ITC, merely on the ground that it not reflected in GSTR-2A is not sustainable.

2. The matter is remanded back to the Assessing Officer and the petitioner is given opportunity to claim ITC and directed to appear before him within fifteen days with all evidence.

3. If on examination of the evidence, the assessing officer is satisfied that the claim is bonafide and genuine, the petitioner should be given input tax credit and the Assessing Authority will pass a fresh order in accordance with law.

The Hon’ble Hight Court of Kerala, relied on Supreme court Judgments remanded back to Assessing Office to collect evident before dening the ITC.

Posted on:19/09/2023

Hon'ble Kerala High Court in the case of  M/s Henna Medicals v. State Tax Officer Second Circle, State Goods and Service Tax Department and Ors 

 The High Court emphasized that a taxpayer's claim for input tax credit should not be denied solely based on the difference between GSTR 2A and GSTR 3B, citing a Hon'ble Supreme Court decision in the case of M/s Ecom Gill Coffee Trading Private Limited.

Justice Dinesh Kumar Singh, in a Single Judge Bench, noted that denying input tax credit based only on the difference in these forms is not justified, following the Supreme Court and Calcutta High Court judgments.

 The Court referred to the case of Diya Agencies, where it was observed that the assessment order denying input tax credit could not be upheld, and the matter was sent back to the Assessing Officer for a thorough examination of the petitioner's evidence.

The High Court directed the Assessing Authority to reconsider the petitioner's claim for input tax credit without solely relying on Form GSTR 2A, emphasizing that its absence should not be deemed sufficient grounds for rejection. 

Posted on:19/10/2023

The Hon’ble Calcutta High Court in M/s. Makhan Lal Sarkar and anrs. vs. the Assistant Commissioner of Revenue, State Tax B.I. and Ors. [WPA/2146/2023 dated September 18, 2023] directed the Revenue Department to hear the appeal afresh as the benefit of Input Tax Credit (“ITC”) was denied due to a mismatch of ITC claimed in Form GSTR-3B and that reflected in Form GSTR-2A in accordance with Circular No. 183/15/2022-GST dated December 27, 2022.

Facts:

M/s. Makhan Lal Sarkar (“the Petitioner”) is a registered partnership firm engaged in the business of Bidi Leaves. During the Financial Year 2017-2018, the Petitioner purchased Bidi leaves from numerous suppliers.  In January 2021, a physical inspection was conducted at the premises of the Petitioner. Thereafter, the proceeding under Section 73 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”) was initiated against the Petitioner. A show cause notice (“the SCN”) dated August 04, 2021 was served on to the Petitioner. The Petitioner’s claim for the benefit of ITC was rejected and was directed to pay penalty along with interest under Section 73 of the CGST Act vide order dated June 07, 2022 (“the Adjudicating Order”).

Aggrieved by the Adjudicating Order, the Petitioner preferred an appeal, but the Petitioner did not appear despite numerous opportunities granted by the Revenue Department (“the Respondent”). The Respondent vide order dated June 28, 2023 (“the Impugned Order”), dismissed the appeal and upheld the order passed by the adjudicating authority under Section 73 of the CGST Act due to a mismatch of ITC claimed in Form GSTR-3B and that reflected in Form GSTR-2A.

Aggrieved by the Impugned Order, the Petitioner filed the writ petition challenging the Impugned Order.

Issue:

Whether the denial of an ITC mismatch claim in GSTR-3B and GSTR-2A be justified when the conditions outlined in Circular No. 183/15/2022-GST are not taken into account?

Held:

The Hon’ble Calcutta High Court in WPA/2146/2023, held as under:

• Observed that, the Petitioner’s contention of a breach of the Principal of Natural Justice can be upheld, as the Petitioner, despite being granted several opportunities, voluntarily opts not to appear before the Respondent, thereby compelling the Respondent to proceed with an ex-parte decree.

• Held that, the Impugned Order is unsustainable because it imposes an obligation on the Respondent to ascertain the mismatch from the documentary evidences available and should have taken into consideration the clarification specified under the Circular pertaining to the respondent’s approach in cases where the supplier had wrongly reported the said supply under B2C instead of B2B in Form GSTR-1, resulting in the omission of the relevant supply or in cases where an incorrect GSTIN of the recipient was declared in Form GSTR-1.

• Directed that, the Petitioner to deposit 20% of the disputed tax amount, in addition to the amount already remitted under Section 107(6) of the CGST Act.

• Further directed that, the Respondent to afford a fresh opportunity to the Petitioner for presenting the appeal. 

Posted on:09/10/2023

The Allahabad High Court in the case of M/s. Malik Traders v. State of Uttar Pradesh and Ors. [Writ Tax No. 1237 of 2021 dated October 18, 2023], dismissed the writ petition and held that, details of the Tax Invoice, E-Way bill, and Goods Receipt are not sufficient to prove the genuineness of the transaction beyond a reasonable doubt, to avail Input Tax Credit (“ITC”). The recipient of purchased goods must provide essential information, including vehicle numbers used for transporting the goods, payment of freight charge, and acknowledgment of receipt, in order to substantiate the genuine physical movement of goods for availment of ITC. The Allahabad High Court in the case of M/s. Malik Traders v. State of Uttar Pradesh and Ors. [Writ Tax No. 1237 of 2021 dated October 18, 2023], dismissed the writ petition and held that, details of the Tax Invoice, E-Way bill, and Goods Receipt are not sufficient to prove the genuineness of the transaction beyond a reasonable doubt, to avail Input Tax Credit (“ITC”). The recipient of purchased goods must provide essential information, including vehicle numbers used for transporting the goods, payment of freight charge, and acknowledgment of receipt, in order to substantiate the genuine physical movement of goods for availment of ITC. Facts:

M/s. Malik Traders (“the Petitioner”) is engaged in the business of purchase and sale of waste materials, plastic scrap, paper scrap, and metal scrap. The Petitioner disclosed the turnover of Rs.34,22,634/- for the period of April 2018 to September 2019 on which ITC of Rs.6,16,074.12/- was availed by the Petitioner. The Petitioner was issued a Show Cause Notice (“SCN”) dated January 23, 2019, under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017 (“the UPGST Act”) on the ground of wrong availment of ITC. The Petitioner submitted a reply against the SCN. However, not satisfied with the response submitted, the Revenue Department (“the Respondent”) vide order dated October 04, 2019, demanded tax liability of Rs.6,16,074/- along with a penalty of Rs.6,16,074/-, the total amount being Rs.12,32,148/-. Aggrieved by the Order, the Petitioner filed an appeal before the Respondent, however, the appeal was rejected vide order dated March 6, 2021 (“the Impugned Order”). 

Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Allahabad High Court, setting aside of Impugned Order or remanding back the matter to the Respondent for re-consideration of the claim of the Petitioner. The counsel for the Petitioner submitted that, the Petitioner has, in its possession Tax Invoices for the goods/scrap purchased from various parties, and E-Way bills were also generated with respect to the said transaction. The goods were transported through trucks along with bilties (Consignment Note) and payment of goods was made through RTGS/NEFT.

The counsel for the Petitioner further submitted that, the Petitioner has rightly discharged the tax liability by paying the GST on the bills that were raised by the seller and the seller should have deposited the GST tax which was paid by the Petitioner, with the government and benefit of ITC cannot be denied to the Petitioner on this ground. It was also stated that, if the ITC claimed is recovered from the Petitioner, it would amount to double taxation which is not in the spirit of the GST regime.

The counsel for the Respondent submitted that, ITC can be availed only when the conditions stipulated in Section 16 of the UPGST Act are fulfilled. It was further submitted that, the Petitioner is required to prove beyond any reasonable doubt that the transactions took place and there was actual physical movement of goods. The Petitioner is required to deposit the details such as vehicle numbers that were used for the transportation of goods, payment of freight charges, and acknowledgment of taking delivery to prove the actual physical movement of goods. Merely furnishing details of Tax-Invoice, E-Way bill, and Goods Receipt is not sufficient to prove the genuineness of the transaction beyond reasonable doubt, for availing ITC. Therefore, the benefit of ITC cannot be accorded to the Petitioner.

Issue:

Whether Tax-Invoice, E-Way Bill and Goods Receipt are sufficient to prove the genuineness of the transaction beyond reasonable doubt, to avail ITC?

Held:

The Hon’ble Allahabad High Court in Writ Tax No. 1237 of 2021 held as under:

• Observed that, the scheme of ITC was introduced to avoid cascading effect of tax and to avoid double taxation. As per Section 16(2) of the UPGST Act, the registered dealer can avail ITC only when the conditions under Section 16 are fulfilled. The proceedings can be initiated against the Petitioner for ITC wrongly availed or utilised by any reason or willful misstatement or suppression of fact.

• Relying upon the judgment of the Hon’ble Supreme Court in the case of State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited [Civil Appeal No. 230 of 2023 dated March 13, 2023] the court noted, the primary burden is upon Petitioner to prove beyond reasonable doubt that the actual transaction and physical movement of goods have taken place. The Petitioner is required to furnish the details of the selling dealer, vehicle number, payment of freight charges, acknowledgment of taking delivery of goods, Tax Invoices and payment particulars, etc. to prove and establish the actual physical movement of the goods. Furnishing details of the Tax Invoice, E-Way bill, and Goods Receipt are not sufficient to prove the genuineness of the transaction beyond a reasonable doubt, for availing ITC.

• Opined that, the facts of the aforementioned case would be applicable in the present case and proceedings have rightly been initiated by the Respondent against the Petitioner.

• Held that, the court is not inclined to interfere with the proceedings initiated by the Respondent, hence the writ petition is dismissed.

Posted on:03/11/2023

The Hon’ble Kerala High Court in the case of M/s. Malabar Fuel Corporation v. Assistant Commissioner Central Tax & Central Excise [WP (C) No. 26112 of 2023 dated January 11, 2024] allowed the writ petition and held that, the Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies.

Facts:

M/s. Malabar Fuel Corporation (“the Petitioner”) is engaged in the business of bottling Liquified Petroleum Gas (“LPG”) in cylinders for both domestic and commercial use. On the bulk supply of LPG received by the Petitioner from various refineries, the Petitioner is required to pay GST @ 18 %. However, after bottling, GST is charged on the value of cylinder supplied to domestic and commercial customers at the rate of 5% and 18% respectively. Thus, there was difference in Input Tax Credit (“ITC”) being higher than the tax on output in respect of the domestic supplies effected by the Supplier after bottling of the LPG in cylinders.

Thereafter, the Petitioner filed an application for refund under Section 54 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for refund of accumulated ITC. However, the application/claim was rejected vide Appellate Order dated June 08, 2023 (“the Impugned Order”) on the basis of Circular No. 135/25/2020 dated March 31, 2020 (“the Circular”).

Aggrieved by the Impugned Order passed against the Petitioner, the Petitioner filed a writ petition before the Hon’ble High Court.

Issue:

Whether Assessee is entitled to claim refund under Inverted Duty Structure even in case of same inward and outward supplies?

Held:

The Hon’ble Kerala High Court in the case of WP (C) No. 26112 of 2023 held as under:

• Observed that, as per clause (ii) of Section 54(3) of the CGST Act, the Assessee is permitted to claim refund of tax, in case where the credit is accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies, or supplies of goods or services or both as notified by the Central Government on the basis of recommendation of GST Council.

• Noted that, as per Section 54 of the CGST Act, the refund of ITC should not be denied when the supplies do not fall within the purview of exceptional clause and credit has accumulated on account of rate of tax on input being higher than rate of tax on output supplies.

• Relying upon the judgement of Hon’ble Gauhati High Court in the case of BMG Informatics Private Limited v. Union of India [WP (C) No. 3675 of 2021 dated September 2, 2021], Hon’ble Calcutta High Court in the case of Shivaco Associates v. Joint Commissioner of State Tax [WPA No. 54 of 2022 dated March 11, 2022] and Hon’ble Delhi High Court in the case of Indian Oil Corporation v. Commissioner of Central Goods and Services Tax and Ors. [WP (C) No. 10222/2023 dated December 05, 2023] opined that, the condition laid down in the Circular pertaining to denial of refund of credit accumulated to a dealer in case when the tax on input is higher than the input supplies, in case where the input and output supplies are same, should not be taken into consideration.

• Held that, the Petitioner is entitled to refund of the ITC accumulated. Hence, the writ petition is allowed.

• Directed that, the matter be remanded back to the assessing authority for calculation of refund.

Posted on:03/03/2024

The Hon’ble Madras High Court in the case of Ingram Micro India (P.) Ltd. v. State Tax Officer [Writ Petition No. 594 of 2024 dated January 12, 2024] held that the Assessing Authority did not apply their mind before drawing conclusions and failed to consider the certificate issued by a Chartered Accountant and all documents submitted by the Assessee. Hence, the Impugned Order was remanded for reconsideration.

Facts:

Ingram Micro India (P.) Ltd. (“the Petitioner”) had claimed Input Tax Credit (“ITC”) under Section 16 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) in respect of the assessment year 2017-2018. A Show Cause Notice (“SCN”) was issued to the Petitioner with regard to non-payment to the suppliers for a period exceeding 180 days. The Petitioner provided all supporting documents, including the Chartered Accountant’s certificate dated December 20, 2023. However, the Revenue Department (“the Respondent”) issued an Order dated December 21, 2023 (“the Impugned Order”) on the basis of the total trade payables of the Petitioner amounting to INR 2704.1 Crores.

The Respondent contended that the total trade payables of the Petitioner were taken into consideration because the Petitioner did not provide a proper breakdown of net trade payables relating to the State of Tamil Nadu.

Hence, aggrieved by the Impugned Order, the present writ petition was filed by the Petitioner.

Issue: 

Whether a Certificate from Chartered Accountant is required to be considered by the department while disallowing the claim of ITC?

Held:

The Hon’ble Madras High Court in Writ Petition No. 594 of 2024, held as under:

• Observed that, all relevant documents were provided by the Petitioner in the reply.

• Noted that, the contentions of the Respondent stating that the entire trade payables of the Company across India should be taken as the trade payables because the Petitioner did not provide Tamil Nadu financial statements are wrong. Under the Companies Act 2013, every company is required to file financial statements regarding all of its operations, and there is no provision for filing state-specific financial statements. However, the Petitioner had submitted a certificate from a Chartered Accountant stating that the trade payables attributable to the State of Tamil Nadu are Rs. 1816.48 million. Learned counsel for the Petitioner also submits that the Petitioner would provide all the invoices issued by the suppliers with regard to the aggregate sum of Rs. 1816.48 million.

• Held that, the Respondent did not apply its mind before drawing the conclusions. Consequently, the matter was remanded for reconsideration by the Respondent. Hence, the Impugned Order was quashed, and writ petition was allowed.

Posted on:03/03/2024

The Hon’ble Madras High Court in M/s. Sri Renga Timbers v. The Assistant Commissioner (ST) (FAC) [W.P. No. 22854 of 2023 dated August 17, 2023] quashed the order passed by the Adjudicating Authority and held that the credit was validly availed cannot be denied, even if there were mistakes in the TRAN-1 returns filed twice.

Facts:

M/s. Sri Renga Timbers (“the Petitioner”) was earlier registered under Tamil Nadu Value Added Tax Act, 2006 (“the TNVAT Act”), with the implementation of GST the Petitioner filed FORM TRAN-1 under Section 140 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) to transmit the Input Tax Credit (“ITC”) lying unutilized with the Petitioner as on June 30, 2017 to GST regime.

The Petitioner transferred the ITC on the stock of inventory of locally purchased taxable goods valued at INR 6,19,89,648/- and declared the ITC carried forward at the end of the month INR  89,88,498/- in the returns filed for the month of June 2017.

The Petitioner transited the aforesaid ITC in table 5(c) in the third column State/Union Territory tax as credit claimed on account of State/Union Territory tax credit carried forwarded in FORM TRAN-1 filed on August 24, 2017.

Further, the said ITC was also utilized by the Petitioner during the course of time for discharging the tax liability for the supplies effected under the Tamil Nadu Goods and Services Tax Act, 2017 (“the TNGST Act”).

In the year 2022, after the decision of the Hon’ble Supreme Court in Union of India v. Filco Trade Centre Private Limited [SLP(C)Nos.32709 & 32710 of 2018 dated July 22, 2022 and September 02, 2022] the Petitioner filed a revised return in TRAN-1 on November 28, 2022, although the decision was rendered to ameliorate the situation arising out of difficulties faced by the assessee to properly file Form GST TRAN-1 due to technical glitches in the web portal.

However, this time the Petitioner instead of showing the amount of credit in column 2 for State/Union Territory Tax against Table 7.c i.e., amount of VAT and Entry Tax paid on inputs supported by invoices under the caption “Inputs Held in Stock”, the petitioner made an entry in Table 7.a.A i.e., for Input Held in Stock, where duty paid invoices were available.

But the Petitioner pointed out this mistake to the Superintendent of GST & Central Excise, Tiruvarur Range.

Thereafter, the Revenue Department (“the Respondent”) in the light of the clarification issued by the Principal Secretary/Commissioner of State Tax vide Circular No.19/2022 – TNGST (PP6/GST/145/2022) datedDecember 14, 2022, the first respondent Assistant Commissioner (ST) (FAC), Mayiladuthurai concluded that the Petitioner wrongly claimed and utilized the excess SGST credit of Rs. 89,88,499/- as per the revised Form GST TRAN-1 as per with the earlier Form GST TRAN-1 claiming the aforesaid credit.

Accordingly, issued a show cause notice and denied the ITC to the tune of sum of INR 89,88,498/-.

Thereafter, the Adjudicating Authority vide an order dated February 27, 2023 (“the Impugned Order”) the Petitioner had wrongly claimed and utilized the excess SGST credit of INR 89,88,499/- as per the revised Form GST TRAN-1 and with earlier Form GST TRAN-1 claiming the aforesaid credit.

Aggrieved by the Impugned Order the Petitioner filed a writ before the Hon’ble Madras High Court.

 The Petitioner contended that the was mistake committed not once but twice and the credit was availed on the stock lying as on June 30, 2017 was transited in FORM TRAN-1 on August 24, 2017 was carried forward by mistake, the amount of VAT/Entry tax on inputs supported by invoices in Table 7.c under the caption “Inputs Held in Stock” and this was sought to be rectified by the Petitioner by filing a revised return on November 28, 2022. However, by mistake a revised TRAN-1 was filed by showing the amounts against the inputs held in stock where duty paid invoices are available in Table7.a.A.

The Respondent contended that as on date only revised TRAN-1 is available, since even as per the Petitioner’s own admission and credit was wrongly transited and there was no credit available against Table 7.c in TRAN-1, therefore, the amount that was utilized by the Petitioner in past has to be denied. The Petitioner was required to pay INR 89,88,499/- together with interest.

Issue:

Whether credit can be denied when the mistake was committed by the assessee in filling TRAN-1?

Held:

The Hon’ble Madras High Court in W.P. No. 22854 of 2023 held as under:

• Observed that, validly availed credit is indefeasible in law and the Petitioner’s errors in filing FORM TRAN-1 on August 24, 2017 and the revised return on November 28, 2022, it was established that the amount of INR 89,88,498 was unutilized credit from the Petitioner’s last return filed for the month of June 2017.

• Opined that, such credit could not be denied, even if there were mistakes in the TRAN-1 returns filed twice.

• Relied Upon the Judgement of Unichem Laboratories v. Commissioner of Central Excise [(2002)7 SCC 145], wherein the Hon’ble Supreme Court held that it is not on the part of the duty of the revenue to deny the benefit that was otherwise legitimately available to an assessee.

• Quashed the Impugned order and remanded back the matter to the Adjudicating Authority to re-examine the records of the petitioner afresh from the last VAT return for the month of June 2017 under the TNVAT Act.

• Opined that, if such credit was available, even if there was any discrepancy while filing Form TRAN-1, the mistakes committed by the petitioner may be overlooked and the credit that availed and utilized can be condoned and regularized.

• Further opined that, in case no credit was available in the last VAT return and was wrongly transited, such credit shall be recovered from the petitioner in accordance with law.

Posted on:03/03/2024

The Hon’ble Kerela High Court in the case of Divya S. R. v. Union of India [WP(C) No. 38 Of 2024 dated January 03, 2024] held that the GST Department to consider the rectification application when the GST Department had mistakenly claimed the entire input tax credit (“ITC”) under heads of Central Goods and Service Tax (“CGST”) and State Goods and Service Tax (“SGST”), instead of claiming it under head Integrated Goods and Service Tax (“IGST”). Hence, the writ petition was disposed of with a direction to the Authority to consider the application filed by the Assessee and pass necessary orders thereon.

Facts:

Divya S. R. (“the Petitioner”) had received IGST credit through the interstate inward supply of goods. The total amount of IGST Credit as reflected in the FORM GSTR 2A was INR 1,14,957/-. The Petitioner while preferring monthly return in the FORM GSTR 3B for July, 2017, by mistake claimed the entire ITC of INR 1,14,957/- under the heads of CGST and SGST, instead of claiming it under the head IGST. This mistake resulted in passing the Assessment Order (“Impugned Order”) by the Revenue Department (“the Respondent”).

The Petitioner had filed a rectification application in FORM GST RFD-01 as provided under Rule 89(1)(A) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”). However, no decision was taken on the said rectification application.

Hence, aggrieved by the Impugned Order the present writ petition was filed by the Petitioner.

Issue: 

Should a rectification application be considered by the GST Department where ITC wrongly claimed under CGST and SGST instead IGST?

Held:

The Kerela High Court in ­­­­­­­­­­WP (C) No. 38 of 2024 held as under:

• Directed that, the Respondent to consider the rectification application filed by the Petitioner under Section 89(1)(A) of the CGST Rules, inserted through Notification No. 35/2021-Central Tax dated September 24, 2021. Further, the Respondent is to pass necessary orders thereon expeditiously as per Section 18 of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”).

• Held that, the writ petition was disposed of with a direction to the Respondent to provide an opportunity of hearing to the Petitioner before the final order is passed on the rectification application, until which no coercive measures shall be taken against the Petitioner for realisation of tax amount assessed in the Impugned Order.

Relevant Provisions:

Section 18 of the IGST Act:

“Transfer of input tax credit. –

On utilisation of credit of integrated tax availed under this Act for payment of,-

(a) central tax in accordance with the provisions of sub-section (5) of section 49 of the Central Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the central tax account in such manner and within such timeas may be prescribed;

(b) Union territory tax in accordance with the provisions of section 9 of the Union Territory Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the Union territory tax account in such manner and within such time as may be prescribed;

(c) State tax in accordance with the provisions of the respective State Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and shall be apportioned to the appropriate State Government and the Central Government shall transfer the amount so apportioned to the account of the appropriate State Government in such manner and within such time as may be prescribed.

Explanation .-For the purposes of this Chapter, ” appropriate State ” in relation to a taxable person, means the State or Union territory where he is registered or is liable to be registered under the provisions of the Central Goods and Services Tax Act.”

Rule 89 of the CGST Rules:

“Application for refund of tax, interest, penalty, fees or any other amount.-

(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:

Provided that the said application may, as regard to any payment of tax on inter-State supply before coming into force of this sub-rule, be filed before the expiry of a period of two years from the date on which this sub-rule comes into force.”

Posted on:05/03/2024