2025 (1) TMI 1076 - HC - GST

Challenge to impugned order on the premise that the same was made in violation of principles of natural justice - HELD THAT - The impugned order dated 24.08.2024 is set aside. The petitioner shall deposit 10% 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 disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the impugned order dated 24.08.2024 was passed in violation of the principles of natural justice.
• Whether the petitioner is entitled to claim Input Tax Credit (ITC) despite the supplier's failure to file GSTR 3B returns.
• Whether the petitioner should be granted an opportunity to present objections to the proposal of denying ITC.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice

• Relevant Legal Framework and Precedents: The principles of natural justice require that a party be given a fair opportunity to present their case before an adverse decision is made. The petitioner cited a precedent from a similar case, Sree Manoj International Vs. Deputy State Tax Officer, where the matter was remanded for reconsideration.
• Court's Interpretation and Reasoning: The court acknowledged the petitioner's argument that they were not given a fair opportunity to address discrepancies before the order was passed.
• Key Evidence and Findings: The petitioner had submitted a reply to the intimation of discrepancies, but the authority proceeded with the order without adequately considering these objections.
• Application of Law to Facts: The court applied the principles of natural justice, emphasizing the need for a fair hearing, and found that the petitioner was not given such an opportunity.
• Treatment of Competing Arguments: The respondent did not strongly object to the petitioner's request for a remand, indicating tacit acknowledgment of procedural lapses.
• Conclusions: The court concluded that the impugned order violated principles of natural justice and thus set it aside, allowing for a fresh opportunity to present objections.

Issue 2: Entitlement to Claim Input Tax Credit (ITC)

• Relevant Legal Framework and Precedents: Under the GST framework, ITC can be claimed on purchases if the supplier has fulfilled tax obligations. However, complexities arise when suppliers fail to file necessary returns.
• Court's Interpretation and Reasoning: The court considered the petitioner's argument that ITC should not be denied solely because the supplier failed to file returns, especially when the petitioner had paid the taxes.
• Key Evidence and Findings: The petitioner demonstrated that they had paid taxes to the supplier, M/s. Kamakshi Industries, which was undergoing liquidation.
• Application of Law to Facts: The court found merit in the argument that the petitioner's ITC claim should not be automatically denied due to the supplier's non-compliance.
• Treatment of Competing Arguments: The respondent's position was weakened by the petitioner's willingness to comply with conditions for reconsideration.
• Conclusions: The court decided to remand the matter for reconsideration, allowing the petitioner to present further evidence supporting their ITC claim.

Issue 3: Opportunity to Present Objections

• Relevant Legal Framework and Precedents: The right to be heard is a fundamental aspect of legal proceedings, ensuring that parties can address concerns before a final decision.
• Court's Interpretation and Reasoning: The court emphasized the importance of allowing the petitioner to submit objections and supporting documents.
• Key Evidence and Findings: The petitioner's readiness to pay 10% of the disputed taxes demonstrated their commitment to resolving the matter.
• Application of Law to Facts: The court facilitated a process where the petitioner could present their case, ensuring compliance with procedural fairness.
• Treatment of Competing Arguments: The respondent's lack of serious objection to this proposal further supported the court's decision.
• Conclusions: The court provided a structured timeline for the petitioner to pay the 10% deposit and submit objections, ensuring a fair opportunity to contest the denial of ITC.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The impugned order dated 24.08.2024 is set aside" and "the impugned order of assessment shall be treated as show cause notice."
• Core Principles Established: The judgment reinforces the principles of natural justice, emphasizing the necessity of a fair hearing and opportunity to present objections before finalizing tax assessments.
• Final Determinations on Each Issue:
  • The impugned order was set aside due to procedural lapses.
  • The petitioner was granted an opportunity to present objections, subject to a 10% deposit of disputed taxes.
  • The matter was remanded for reconsideration, ensuring compliance with natural justice principles.