2024 (3) TMI 1395 - HC - GST

Recovery of Input Tax Credit (ITC) due to the supplier s failure to file GSTR-3B returns - demand notice was filed within the permissible time limit under Section 107 of the CGST/TNGST Act 2017 or not - condonation of delay of 2 months and 21 days in filing appeal - HELD THAT - In the instant case though the petitioner has submitted his reply dated 17.05.2023 to the show cause notice in which the date was mentioned as 18.05.2023 and the petitioner was not aware of the order passed by the adjudication authority on 02.08.2023 and a DRC-07 notice on 03.08.2023. The petitioner was under the bona fide belief that the 1st respondent is satisfied with the reply dated 17.05.2023 and the proceedings are kept in abeyance. Only after the receipt of oral communication with regard to the recovery by the department the petitioner came to know about the proceedings of the 1st respondent. This Court is of the considered view that the delay of 2 months and 21 days is condoned on condition that the petitioner shall pay 15% of the disputed tax on or before 25.03.2024 and on payment of the same the petitioner may prefer the appeal before the 1st respondent / The Deputy Commissioner (ST) GST Appeal Chennai within a period of two weeks thereof. Conclusion - The delay of 2 months and 21 days is condoned on condition that the petitioner shall pay 15% of the disputed tax on or before 25.03.2024. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions presented and considered in this judgment are:

Whether the petitioner is liable for the recovery of Input Tax Credit (ITC) due to the supplier's failure to file GSTR-3B returns and pay taxes, as per Section 16(2)(c) of the CGST/TNGST Act, 2017.
Whether the petitioner's appeal against the demand notice was filed within the permissible time limit under Section 107 of the CGST/TNGST Act, 2017.
Whether the delay in filing the appeal can be condoned by the court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability for Recovery of ITC

Relevant Legal Framework and Precedents: The case revolves around Section 16(2)(c) of the CGST/TNGST Act, 2017, which stipulates conditions for availing ITC. The provision requires that the tax charged in respect of the supply has been actually paid to the government.
Court's Interpretation and Reasoning: The court considered whether the petitioner, who had duly paid taxes and reflected the supplies in GSTR-2A, could be penalized for the supplier's failure to file returns and pay taxes.
Key Evidence and Findings: The petitioner had made tax payments through proper banking channels, and the supplier had loaded credit details in GSTR-2A. However, the supplier failed to file GSTR-3B returns.
Application of Law to Facts: The court recognized the difficulty for businesses to ensure suppliers' compliance with tax obligations, noting the petitioner's compliance with their own tax responsibilities.
Treatment of Competing Arguments: The petitioner argued against being penalized for the supplier's non-compliance, while the respondent maintained the recovery was justified under the Act.
Conclusions: The court did not make a final determination on this issue but focused on the procedural aspect of the appeal.

Issue 2: Timeliness of the Appeal

Relevant Legal Framework and Precedents: Section 107 of the CGST/TNGST Act, 2017, outlines the time limits for filing an appeal and conditions under which a delay may be condoned.
Court's Interpretation and Reasoning: The court examined whether the appeal was filed within the statutory time limits and whether there was a sufficient cause for the delay.
Key Evidence and Findings: The appeal was filed with a delay of 2 months and 21 days. The petitioner believed proceedings were in abeyance due to a lack of communication from the respondent.
Application of Law to Facts: The court considered the petitioner's bona fide belief that the matter was resolved and the procedural confusion that led to the delay.
Treatment of Competing Arguments: The petitioner argued for condonation of delay due to misunderstanding, while the respondent cited statutory limits for appeal filing.
Conclusions: The court condoned the delay, allowing the petitioner to proceed with the appeal upon payment of 15% of the disputed tax.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: The court stated, "In view of the above factual matrix of the case, this Court is of the considered view that the delay of 2 months and 21 days is condoned on condition that the petitioner shall pay 15% of the disputed tax on or before 25.03.2024."
Core Principles Established: The judgment emphasizes the importance of procedural fairness and the ability of courts to condone delays when justified by sufficient cause.
Final Determinations on Each Issue: The court did not make a final determination on the substantive issue of ITC recovery but allowed the procedural appeal to proceed, subject to conditions.

The judgment reflects the court's consideration of procedural fairness and the challenges faced by businesses in ensuring compliance with tax regulations by their suppliers. The decision to condone the delay in filing the appeal underscores the court's recognition of potential administrative misunderstandings and the need for equitable treatment of taxpayers.

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