2023 (11) TMI 664 - HC - GST

Disallowance of ITC - Validity of order passed u/s 74 - allegation of creation of bogus invoices - circular trading without movement of goods with an intention to avail irregular ITC - HELD THAT - It is not in dispute that in the present case, only the input tax credit (ITC) alone was disallowed and the same will not have any impact on the petitioners inasmuch disallowing the input tax credit will affect the beneficiary who availed it and in the present case, M/s.SKMPL in liquidation is the beneficiary and not the petitioners. As against the petitioners, penalty and interest were fastened based on the search conducted and the documents seized at the premises of the petitioners, where it was found that the petitioners had indulged in creation of bogus invoices and they had not at all conducted any business activities and it was concluded that the cotton yarn purchased and sold by the petitioners have not been received in the premises - This Court does not find any violation of principles of natural justice and deprival of any constitutional rights. In such view of the matter, this Court is not inclined to entertain the Writ Petitions. Considering the fact that as against the impugned orders, there is an efficacious appeal remedy available to the petitioners, without adverting to the grounds raised by the petitioners in respect of the impugned orders, this Court grant liberty to the petitioners to prefer appeals before the appropriate authority within a period of 30 days from the date of receipt of a copy of this order, without insisting upon the aspect of limitation - Petition dismissed.

Summary

Issues involved:
Challenging impugned orders under CGST Act/SGST Act as arbitrary, illegal, and ultra vires Section 50 and 74. Common issue in both Writ Petitions.

Details of the judgment:

Issue 1:
The petitioners engaged in buying and selling yarn faced show cause notices for irregular ITC availed under CGST and SGST. Respondents alleged circular trading without goods movement to avail ITC. Petitioners contended constructive delivery is relevant for ITC, not physical receipt. They argued penalties under Section 122 not invoked, making penalty under Section 74 impermissible.

Issue 2:
Similar situation for other petitioners buying and selling yarn. Allegations of no business activity, lack of proof for goods movement, and disallowed ITC. Petitioners requested abeyance due to interlinked transactions with a company in liquidation. Respondents passed orders disallowing ITC, assessing tax liability, and confirming tax demand under CGST/SGST Act.

Judgment:
The Court noted only ITC was disallowed, affecting the beneficiary in liquidation, not the petitioners. Penalties and interest were imposed based on search findings of bogus invoices and lack of business activities. No violation of natural justice principles found. Writ Petitions dismissed, with liberty to appeal within 30 days without limitation enforcement. Appellate authority to decide pre-deposit for appeals. No costs incurred.