2024 (10) TMI 958 - HC - GST

Violation of principles of natural justice - challenge to impugned ex-parte order - wrongful availment of ITC - fake invoices - HELD THAT - A perusal of the impugned order dated 15.02.2024 reveals that the purchase made by the petitioner found to be based on fake invoice and wrongly availed input tax credit and hence, by invoking Section 74, the respondent demanded the total tax liability of Rs. 38,361/- including penalty and interest. The respondent has taken into consideration the payment made by the petitioner towards CGST and SGST through DRC-03 dated 09.09.2017, however, since there was no payment of tax on the supply made by the supplier, the respondent treated the purchase made by the petitioner was on fake invoices and thereby, invoked Section 74 of the Act and rightly passed the impugned order after affording ample opportunity to the petitioner. This Court does not find any infirmity in the impugned order passed by the respondent. In fact, as against the impugned order passed by the respondent under Section 74 of the Act, the petitioner is having efficacious appeal remedy under Section 107 of the Act and without exhausting such remedy, the petitioner has filed the present Writ Petition, which is not maintainable on this ground also. This Writ Petition fails and it is dismissed.

Summary

Issues:
Challenge to ex-parte order under GST Act invoking Sections 73 and 74, violation of principles of natural justice, opportunity of personal hearing, input tax credit availed on fake invoices, demand of total tax liability, maintainability of Writ Petition without exhausting appeal remedy under Section 107 of the Act.

Analysis:
The petitioner challenged an ex-parte order dated 15.02.2024 passed by the respondent under the GST Act, alleging a violation of natural justice principles as no personal hearing was provided. The petitioner claimed to have purchased goods from a registered supplier, Haresh Enterprises, who collected tax and reported it in their returns. However, the respondent issued a show cause notice demanding repayment of input tax credit due to the supplier's suspended GST registration. The petitioner paid the tax but not the interest, leading to the impugned order under Section 74 of the Act. The petitioner argued that the order was passed without considering Sections 73 or 74 of the Act, violating natural justice principles.

The respondent contended that the petitioner was given multiple opportunities to explain discrepancies but failed to respond adequately. The respondent issued reminder notices and provided a personal hearing opportunity, which the petitioner did not avail. The respondent justified the impugned order as necessary due to the alleged fraudulent activity of availing input tax credit based on fake invoices without actual movement of goods. The respondent demanded reversal of credit, interest, and penalty, which the petitioner did not comply with, leading to the Section 74 order.

The Court noted that the respondent's actions were based on the dealer's suspension and alleged fraudulent activities by the petitioner. The Court found that the petitioner did not respond to the show cause notice or avail the personal hearing opportunity. The Court rejected the petitioner's claim of lack of personal hearing and upheld the impugned order demanding the total tax liability. The Court emphasized that the petitioner had an appeal remedy under Section 107 of the Act, which should have been exhausted before filing the Writ Petition. As the petitioner did not do so, the Writ Petition was deemed not maintainable, leading to its dismissal without costs.