2022 (10) TMI 462 - HC - GST

Constitutional Validity of Section 16(2) (c) of the CGST Act/WBGST Act - denial of input tax credit, where the purchasers are proved to be collusive and in the nature of sham transaction - HELD THAT - The only reason for declining the input tax credit was on the ground that the selling dealers registration was cancelled with retrospective effect. Be that as it may, the larger relief sought for by the respondents/writ petitioners mainly writ of declaration has not been granted by the learned Single Judge. The respondents/writ petitioners are not on appeal as against the said finding. The directions issued by the learned Single Judge were not only in the interest of the respondents/writ petitioners, but also would safeguard the interest of the revenue - matter has been sent back to the appellant authority to enable verification of documents, correspondences exchanged between the Department and the writ petitioner which have been referred to as memos, it is found that the actual adjudication of the dispute has not taken place which is required to be done before an order is passed either accepting or denying the input tax credit. Appeal dismissed with a direction to the respondents/writ petitioners to submit one more set of documents which they seek to rely upon to the concerned appellant authority within a period of two weeks from the date of receipt of the server copy of this order and on receipt of these documents.

Summary

Issues:
Delay in filing appeals, constitutionality of Section 16(2)(c) of the CGST Act/WBGST Act, quashing of memos dated 28.08.2019 and 11.11.2019, granting of input tax credit, directions issued by the learned Single Judge, verification of documents, adjudication of the dispute, submission of additional documents, personal hearing, conclusion of proceedings.

Analysis:
The High Court of Calcutta, comprising Hon'ble Justice T.S. Sivagnanam and Hon'ble Justice Supratim Bhattacharya, addressed the issue of delay in filing appeals and condoned the delay after perusing the affidavit filed in support of the application. The Court found sufficient cause for the delay and allowed the application for condonation of delay. The appeals were directed against a common judgment and order passed by the learned Single Judge, where the respondents/writ petitioners sought a writ of declaration to declare Section 16(2)(c) of the CGST Act/WBGST Act as unconstitutional. The respondents also sought the quashing of memos dated 28.08.2019 and 11.11.2019. The Court noted that the direction issued by the learned Single Judge was considered innocuous, and the appeals were preferred by the State on the grounds of prematurity of the writ petition and pending challenges to the constitutional validity of the provision.

Regarding the input tax credit, the Court observed that the only reason for denying the credit was the retrospective cancellation of the selling dealers' registration. While the larger relief sought by the respondents was not granted by the Single Judge, the Court found that the directions issued were in the interest of both the respondents and the revenue. The matter was sent back to the appellant authority for verification of documents and correspondence to enable the actual adjudication of the dispute, emphasizing the need for proper adjudication before deciding on the input tax credit.

The Court concluded that no interference was warranted with the directions issued by the learned Single Judge. Both appeals were dismissed with a direction for the respondents/writ petitioners to submit an additional set of documents within two weeks to the concerned appellant authority. The authority was instructed to afford a personal hearing to the authorized representative of the respondents, peruse the documents, and act on merits in accordance with the law, aiming to conclude the proceedings expeditiously within four weeks from the date of the personal hearing. It was clarified that neither the writ court nor the High Court had adjudicated the merits of the case, allowing the respondents to present all factual and legal issues before the concerned authority. Consequently, all connected applications to the appeals were dismissed, and no costs were awarded.