2024 (5) TMI 113 - HC - GST

Eligibility for Input Tax Credit - failure to report outward supply - discrepancy between the petitioner's GSTR 1 and GSTR 3B - items not notified for being taxed on reverse charge basis - HELD THAT - The respondent proceeded on the basis that it was an outward supply of goods. Such conclusion indicates non application of mind. The petitioner submitted an explanation that the discrepancy was rectified while filing subsequent returns or that the discrepancy occurred on account of lower payments being made. On examining the impugned order on this aspect, it is noticeable that the respondents were not fully satisfied with the documentary evidence placed on record by the petitioner. The failure of the petitioner to provide all relevant documents certainly contributed to the state of affairs. With regard to the findings on these issues, it is appropriate to put the petitioner on terms as a condition for reconsideration. The impugned order is set aside subject to the condition that the petitioner remits 10% of the disputed tax demand, on the assumption that tax is leviable at 12% thereon. Such remittance shall be made within two weeks from the date of receipt of a copy of this order. Subject to receipt thereof, the 1st respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within a period of three months from the date of receipt of remittance from the petitioner. The writ petition is disposed off.

Summary

Issues involved:
The issues involved in this case include challenge to an order in original dated 09.11.2023, discrepancies in tax imposition, compliance with principles of natural justice, and eligibility of Input Tax Credit (ITC).

Challenge to Order in Original:
The petitioner challenged an order dated 09.11.2023, which was issued after the petitioner replied to a show cause notice dated 09.05.2023. The petitioner's counsel argued that certain expenses were taxed on reverse charge basis without proper explanation, and discrepancies in tax rates were not rectified despite explanations provided. The petitioner agreed to remit 10% if the tax liability was computed at the correct rate of 12%.

Compliance with Principles of Natural Justice:
The Additional Government Pleader stated that the principles of natural justice were followed in issuing the impugned order. It was argued that the order was detailed and findings were based on evidence, thus no interference was warranted under Article 226 of the Constitution of India.

Discrepancies in Tax Imposition:
Regarding items not falling under reverse charge mechanism, it was found that the tax liability imposed on the petitioner was not properly examined in relation to relevant goods or services. The impugned order was deemed to require reconsideration on these aspects.

Eligibility of Input Tax Credit (ITC):
In the case of ineligible ITC related to purchases where tax was collected at source, the order concluded that the tax payer failed to report outward supply of goods, leading to a tax liability at 18%. However, it was observed that this conclusion was made without proper consideration. The petitioner's explanations for discrepancies in tax rates were not fully accepted due to insufficient documentary evidence. The impugned order was set aside with the condition that the petitioner remits 10% of the disputed tax demand within two weeks for reconsideration and issuance of a fresh order within three months.

Disposition:
The writ petition was disposed of without costs, with directions for the petitioner to remit a portion of the disputed tax demand and for the 1st respondent to provide a reasonable opportunity for reconsideration.