2024 (4) TMI 995 - HC - GST

Validity Of Order passed u/s 73 - demand in respect of denial of ITC to the petitioner with respect to the suppliers whose GST registration has been cancelled retrospectively - Denial of the right of cross-examination - Refund of coercive deposit of Rs 20 Lakhs during search and survey proceedings - HELD THAT - Denial of the right of cross-examination can cause grave and serious prejudice to an entity. In the instant case, the proper officer has himself noticed that the proper officer has intended to summon the said person, however on account of paucity of time declined to do so. Such a course cannot be countenance for the same caused grave prejudice to the person against whom the said statement or document is sought to be relied upon. Accordingly, in view of the fact that the proper officer himself intended to summon the said witnesses, however did not do so on account of paucity of time, the impugned order to the limited extent, of the denial of input credit tax in respect of cancelled dealers, cannot be sustained and is accordingly set aside. The Show Cause Notice is remitted to the proper officer for re-adjudication on the said aspect after summoning the said dealers/suppliers for the purpose of cross examination and giving an opportunity of hearing to the petitioner. Since the contention of the petitioner is that the deposit was not voluntary and was under coercion and a request for refund was made to the proper officer, the proper office should have considered the same in accordance with law. Accordingly, while reconsidering the issue with regard to denial of input tax credit for cancelled dealer, the proper officer shall also consider the request of the petitioner for refund of the said amount of Rs. 20 lacs in accordance with law keeping in view the various pronouncements rendered by this Court with regard to involuntary deposit. It is clarified that this Court has neither considered nor commented upon the nature of deposit made by the petitioner i.e. as to whether the same was voluntary or involuntary and also with regard to the contention of the respondent that even if the amount is held to be an involuntary deposit, the same is liable to be adjusted against a demand that is liable to be created against the petitioner. All rights and contentions of the parties are left open. Petition is accordingly petition is allowed in the above terms with a limited order of remit to the proper officer as noticed hereinabove.

Summary

Issues involved: Impugning order u/s 73 of CGST Act, denial of ITC to petitioner, right of cross-examination denied, coercion to deposit Rs 20 Lakhs, refund request not considered.

Impugning order u/s 73 of CGST Act: The petitioner challenged an order dated 29.12.2023 passed u/s 73 of the Central Goods and Services Tax Act, which created a demand against the petitioner.

Denial of ITC to petitioner: The petitioner contested the order to the extent that it confirmed the demand by denying Input Tax Credit (ITC) in relation to suppliers whose GST registration was cancelled retrospectively.

Right of cross-examination denied: The petitioner requested the right of cross-examination of witnesses and authors of documents relied upon by the proper officer, but it was denied due to paucity of time, causing serious prejudice as noted by the proper officer himself.

Coercion to deposit Rs 20 Lakhs: The petitioner was coerced to deposit Rs 20 Lakhs during a search and survey, which was not considered in the impugned order despite being raised by the petitioner and noted by the proper officer.

Refund request not considered: The petitioner sought a refund of the Rs 20 Lakhs deposited involuntarily during search and survey proceedings, which was not addressed in the impugned order.

Conclusion: The High Court set aside the impugned order to the extent of denial of input tax credit for cancelled dealers, remitting the Show Cause Notice for re-adjudication after allowing cross-examination of witnesses. The Court directed the proper officer to reconsider the refund request of Rs 20 Lakhs in accordance with law, citing previous judgments on involuntary deposits. The Court clarified that it did not comment on the nature of the deposit and left all rights and contentions of the parties open. The petition was allowed with a limited order of remit to the proper officer, and the challenge to Notification No. 9 of 2023 regarding the initial extension of time was left open.