2021 (6) TMI 139 - HC - GST

Input tax credit - non-payment of GST from April, 2018 to March 2019 - concealment of facts - initiation of inquiry under Section 74(1) of the CGST Act, 2017 - HELD THAT - This court is of the view that since a proceeding under Section 74(1) of the CGST Act, 2017 has been launched by the respondent No.5, that proceeding should be allowed to reach its logical end. But for the contemplative action, due payment of the petitioner is on hold, the respondent No.5 is directed to complete the proceeding within a period of 2(two) months from the date of receipt of the reply from the petitioner without fail. It is useless to keep the writ petition pending and no purpose would be served thereof, inasmuch as if by the final order, is aggrieved, that would give rise to a new cause of action - petition disposed off.

Summary

Issues:
Challenging direction in communication dated 20.12.2019 regarding GST evasion and non-filing of returns, Allegations of irregular Input Tax Credit (ITC) availed, Withholding of payment by respondent No.3, Verification of payment proof submitted by petitioner, Inquiry under Section 74(1) of CGST Act, 2017, Respondent No.5 directed to complete proceeding within 2 months.

Analysis:
The petitioner challenged a communication dated 20.12.2019 alleging GST evasion and non-compliance with tax liabilities. The respondent No.5 informed about the petitioner's engagement in taxable services without fulfilling tax obligations, including non-filing of GSTR returns. The petitioner was accused of irregularly availing Input Tax Credit (ITC) and withholding GST payments, leading to a significant accrued amount. The respondent No.5 directed to hold payment until clearance, prompting the petitioner to seek release of outstanding payment.

The petitioner submitted proof of GST payment and cooperation with the investigation, while the principal respondents contended that ITC irregularities need reversal with applicable interest. An inquiry under Section 74(1) of the CGST Act, 2017 was initiated, with the respondent No.5 in the process of issuing a show-cause notice for adjudication. The petitioner was required to respond within 30 days, failing which decisions would be based on existing evidence.

Acknowledging the ongoing inquiry, the court directed the respondent No.5 to conclude the proceeding within two months. The petitioner's due payment was put on hold pending the investigation's completion. The court emphasized allowing the Section 74(1) proceeding to reach its logical end, disposing of the writ petition without costs. The order served on the petitioner was made part of the record for future reference, with copies provided to the respective counsels.