2025 (1) TMI 918 - HC - GST

Challenge to impugned notice in DRC 01A and the order for the assessment year 2017-18 - challenge to order of assessment for the assessment year 2019-20 and the bank attachment - discrepancies in the Input Tax Credit (ITC) claims - implications of the amendment to Section 16 of the GST Act on the assessment order for the year 2019-20 - HELD THAT - The impugned orders are set aside. The petitioner shall deposit 25% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent, within a period of four weeks from the date of receipt of a copy of this order. Petition closed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

• Whether the impugned notices and orders for the assessment years 2017-18 and 2019-20 were validly served upon the petitioner.
• Whether the discrepancies in the Input Tax Credit (ITC) claims for the assessment years 2017-18 and 2019-20 were justified under the GST Act.
• Whether the petitioner is entitled to a reassessment opportunity in light of the procedural issues and recent amendments to the GST Act.
• The implications of the amendment to Section 16 of the GST Act on the assessment order for the year 2019-20.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Service of Notices and Orders

• Relevant legal framework and precedents: The GST Act requires that notices and orders be served through prescribed means, including registered post or direct delivery.
• Court's interpretation and reasoning: The court noted that the petitioner claimed to have been unaware of the proceedings due to improper service, as notices were uploaded on the GST Portal without direct notification.
• Key evidence and findings: The petitioner failed to appear for hearings due to alleged non-receipt of notices, which were only uploaded online.
• Application of law to facts: The court found merit in the petitioner's argument that lack of direct service impeded their ability to respond.
• Treatment of competing arguments: The respondent did not contest the claim of improper service, allowing the court to focus on procedural fairness.
• Conclusions: The court concluded that the service of notices was procedurally flawed, warranting a reassessment opportunity.

Issue 2: Discrepancies in ITC Claims

• Relevant legal framework and precedents: Section 16(4) of the GST Act limits the period for claiming ITC. The petitioner was accused of under-declaring ineligible ITC and claiming ITC beyond the prescribed period.
• Court's interpretation and reasoning: The court considered the recent amendment to Section 16, which potentially altered the eligibility for ITC claims.
• Key evidence and findings: The petitioner argued that the discrepancies were due to a mismatch between GSTR 3B and GSTR 2A for 2017-18 and excess ITC claims for 2019-20.
• Application of law to facts: The court acknowledged the petitioner's readiness to pay 25% of the disputed taxes and the potential impact of the legislative amendment.
• Treatment of competing arguments: The respondent agreed to a reassessment in light of the amendment, leading the court to remand the matter.
• Conclusions: The court set aside the impugned orders and provided conditions for reassessment, including partial payment of disputed taxes.

Issue 3: Reassessment Opportunity

• Relevant legal framework and precedents: Procedural fairness and the right to be heard are fundamental principles in tax adjudication.
• Court's interpretation and reasoning: The court emphasized the need for a fair hearing and the opportunity for the petitioner to present objections.
• Key evidence and findings: The petitioner expressed willingness to comply with conditions for reassessment, including payment of 25% of disputed taxes.
• Application of law to facts: The court facilitated a reassessment process, treating the impugned orders as show cause notices.
• Treatment of competing arguments: Both parties consented to the terms of reassessment, simplifying the court's decision.
• Conclusions: The court ordered reassessment subject to compliance with specified conditions, ensuring procedural fairness.

Issue 4: Impact of Amendment to Section 16 of the GST Act

• Relevant legal framework and precedents: The amendment to Section 16 introduced by the Finance (No. 2) Act, 2024, potentially affects ITC claims for specific financial years.
• Court's interpretation and reasoning: The court recognized the amendment's retrospective effect, which could invalidate the basis for denying ITC claims.
• Key evidence and findings: The petitioner argued that the amendment nullified the grounds for ITC denial for 2019-20.
• Application of law to facts: The court agreed that the amendment necessitated a reassessment of ITC claims.
• Treatment of competing arguments: The respondent did not object to reassessment in light of the amendment, facilitating the court's decision.
• Conclusions: The court ordered a reassessment, considering the amendment's implications on ITC eligibility.

3. SIGNIFICANT HOLDINGS

• Verbatim quotes of crucial legal reasoning: "The impugned orders are set aside. The petitioner shall deposit 25% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent, within a period of four weeks from the date of receipt of a copy of this order."
• Core principles established: Procedural fairness and the right to a fair hearing are paramount in tax adjudication; amendments to tax laws can have retrospective effects on ongoing assessments.
• Final determinations on each issue: The court set aside the impugned orders for both assessment years, ordered partial payment of disputed taxes, and mandated reassessment with an opportunity for the petitioner to present objections.