2025 (2) TMI 876 - HC - GST

Reversal of credit availed on the strength of invoices - Fraudulent passing on input tax credit without actual supply of goods - petitioner is ready and willing to pay 25% of the disputed tax - HELD THAT - 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. If any amount has been recovered or paid out of the disputed taxes including by way of pre-deposit in appeal the same would be reduced/adjusted from/towards the 25% of disputed taxes directed to be paid. The assessing authority shall then intimate the balance amount out of 25 % of disputed taxes to be paid if any within a period of one week from the date of receipt of a copy of this order. The petitioner shall deposit such remaining sum within a period of three weeks from such intimation. The impugned order dated 30.04.2024 is set aside - Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED:

1. Whether the impugned order passed by the respondent relating to the assessment year 2018-19 is valid?

2. Whether the petitioner is liable to reverse the credit availed on the strength of invoices issued by Jaya Trading Company?

3. Whether the petitioner's failure to respond to notices and opportunities for personal hearings justifies the impugned order?

4. Whether the petitioner's offer to pay 25% of the disputed tax and request for a final opportunity before the adjudicating authority should be accepted?

ISSUE-WISE DETAILED ANALYSIS:

Issue 1: Validity of the Impugned Order

- Relevant legal framework and precedents: The petitioner challenged the impugned order related to the assessment year 2018-19.

- Court's interpretation and reasoning: The Court considered the petitioner's compliance with tax regulations and the investigation against Jaya Trading Company for fraudulent activities.

- Key evidence and findings: The investigation revealed potential irregularities in the petitioner's transactions with Jaya Trading Company.

- Application of law to facts: The Court set aside the impugned order and directed the petitioner to deposit 25% of the disputed taxes.

- Treatment of competing arguments: The petitioner sought to rely on a recent judgment and offered to pay a portion of the disputed tax.

- Conclusions: The Court ruled in favor of the petitioner, setting aside the impugned order and imposing conditions for tax payment and compliance.

Issue 2: Liability to Reverse Credit Availed

- Relevant legal framework and precedents: The investigation revealed potential misuse of input tax credit by Jaya Trading Company.

- Court's interpretation and reasoning: The Court considered the petitioner's receipt of credit based on invoices from the said company.

- Key evidence and findings: The petitioner availed credit based on potentially fraudulent transactions by Jaya Trading Company.

- Application of law to facts: The Court directed the petitioner to reverse the credit availed from the questionable invoices.

- Treatment of competing arguments: The petitioner's failure to respond to notices was a factor in the Court's decision.

- Conclusions: The Court upheld the requirement for the petitioner to reverse the credit and comply with tax regulations.

Issue 3: Failure to Respond to Notices and Hearings

- Relevant legal framework and precedents: The Court considered the petitioner's lack of response to notices and opportunities for personal hearings.

- Court's interpretation and reasoning: The Court viewed the petitioner's non-compliance with the investigation process seriously.

- Key evidence and findings: The petitioner did not file replies or attend personal hearings despite multiple opportunities.

- Application of law to facts: The Court found the petitioner's lack of cooperation as a basis for confirming the impugned order.

- Treatment of competing arguments: The petitioner's counsel sought leniency based on willingness to pay a portion of the disputed tax.

- Conclusions: The Court emphasized the importance of compliance and upheld the impugned order due to the petitioner's failure to engage in the investigation process.

Issue 4: Offer to Pay 25% of Disputed Tax

- Relevant legal framework and precedents: The petitioner offered to pay 25% of the disputed tax and requested a final opportunity before the adjudicating authority.

- Court's interpretation and reasoning: The Court considered the petitioner's willingness to cooperate and make partial payment.

- Key evidence and findings: The petitioner's readiness to pay a portion of the tax was a factor in the Court's decision-making.

- Application of law to facts: The Court accepted the petitioner's offer to pay 25% of the disputed tax and granted an opportunity for further objections before the adjudicating authority.

- Treatment of competing arguments: The respondent did not strongly object to the petitioner's request for a final opportunity to present objections.

- Conclusions: The Court approved the petitioner's offer to pay 25% of the disputed tax and allowed for additional objections to be raised before the adjudicating authority.

SIGNIFICANT HOLDINGS:

- The impugned order dated 30.04.2024 was set aside.

- The petitioner was directed to deposit 25% of the disputed taxes within a specified period.

- Non-compliance with the payment condition would result in the restoration of the impugned order.

- The Court emphasized the importance of timely compliance and cooperation in tax investigations.