2022 (12) TMI 344 - HC - GST

Reversal of ITC - specific ground was taken that all the GST was deposited timely and all the relevant documents were placed before the authorities and the claim of ITC was wrongly cancelled by the Assessing Authority - assessment year 2019-20 - HELD THAT - From reading of both the Sections 16 and 74 of CGST Act 2017, it is clear that the Legislature has provided the benefit of input tax credit to those assessee who had supplied goods or services and are registered dealers and further on the requirement being fulfilled as per the provisions can make claim. Section 74 puts embargo and places a restriction and gives a handle to the authorities that in case of availing the benefit wrongfully or by reasons of fraud or willful mis-statement of the fact a notice is issued to the assessee and upon adjudication amount is recovered and ITC claimed is reversed. In the present case a show cause notice was issued to the assessee on 09.12.2019 which was replied by the assessee. The claim was rejected vide order dated 23.01.2020, thereafter, the appellate authority while confirming the order of cancellation of ITC had recorded a categorical finding to the effect that though all the documents were placed on record by the assessee yet it was found that no evidence was placed on record in regard to the payment made for loading and unloading of the goods. This Court finds that finding recorded by the first Appellate Authority is cryptic as it only states in its order that the registration of the supplier was cancelled, but no date of cancellation has been mentioned so as to demonstrate whether transaction took place prior to cancellation or subsequently - This Court finds that the finding recorded by the first Appellate Authority cannot be sustained and the same is hereby set-aside. The matter is remanded to the first Appellate Authority to record specific finding as to when the registration of supplier i.e. M/s Riddhi Siddhi Enterprises, Agra was cancelled - Petition allowed in part.

Issues Involved:
1. Reversal of Input Tax Credit (ITC) by the Assessing Authority.
2. Validity of the order passed by the Additional Commissioner, Grade-II, in appeal.
3. Compliance with conditions under Section 16 of the Goods & Services Tax Act, 2017.
4. Application of Section 74 of the Goods & Services Tax Act, 2017.

Detailed Analysis of the Judgment:

1. Reversal of Input Tax Credit (ITC) by the Assessing Authority:
The petitioner, a proprietorship firm engaged in the business of purchasing and selling empty tin boxes, challenged the order passed by the Assessing Authority which reversed the ITC. The Assessing Authority issued a show cause notice under Section 74 of the Goods & Services Tax Act, 2017 on 09.12.2019. Despite the petitioner's online reply, the Deputy Commissioner rejected the claim on 23.01.2020. The petitioner contended that all GST was deposited timely, and relevant documents were submitted, but the ITC was wrongly canceled.

2. Validity of the Order Passed by the Additional Commissioner, Grade-II, in Appeal:
The petitioner appealed to the first Appellate Authority, arguing that the ITC claim was wrongly canceled despite timely GST deposits and submission of all relevant documents. The first Appellate Authority dismissed the appeal on 20.10.2020, citing that the supplier's registration was canceled and no amount for loading and unloading of goods was mentioned. The petitioner argued that the supplier's registration was canceled after the transaction date, making the appellate authority's finding erroneous.

3. Compliance with Conditions under Section 16 of the Goods & Services Tax Act, 2017:
Section 16 outlines the eligibility and conditions for taking ITC. The petitioner argued that all necessary documents, including tax invoices, e-way bills, and transporter bilty, were submitted and verified. However, the ITC claim was rejected solely because no amount for loading and unloading was mentioned. The court noted that Section 16(2) specifies that ITC can only be claimed if certain conditions are met, including possession of a tax invoice and receipt of goods.

4. Application of Section 74 of the Goods & Services Tax Act, 2017:
Section 74 deals with the determination of tax not paid or ITC wrongly availed due to fraud or willful misstatement. The Standing Counsel for the department argued that the transaction was fake, and no goods were actually transferred, thus justifying the rejection of the ITC claim. The court emphasized that Section 74 provides a mechanism for issuing a show cause notice and recovering the amount if ITC is wrongly availed due to fraud or misstatement.

Court's Findings:
The court found the first Appellate Authority's findings cryptic, as it did not specify the date of the supplier's registration cancellation or whether the transaction occurred before or after the cancellation. The court also noted that the appellate authority dismissed the ITC claim based on the absence of records for loading and unloading payments, which was insufficient.

Court's Decision:
The court set aside the first Appellate Authority's order and remanded the matter for a specific finding on the cancellation date of the supplier's registration and whether any business activity was conducted by the supplier firm. The first Appellate Authority was directed to complete this exercise within six weeks from the date of the certified copy of the order. If further information was required from the assessee or regarding the supplier's registration, it should be done within two weeks.

Conclusion:
The writ petitions were partly allowed, and the case was remanded to the first Appellate Authority for a detailed examination and specific findings regarding the supplier's registration status and business activities.

← Previous Next →