2024 (2) TMI 941 - HC - GST

Input Tax Credit (ITC) - Wrong availing of input tax credits by the petitioner under the provisions of the respective GST Enactments - non-compliance with the requirements of Section 67 of the TNGST Act 2017 - Proper officer of GST could not conduct the inspection since the premises of the assessee was under the custody of bank under the SARFAESI Act. - neither a Show Cause Notice was issued to the petitioner nor a reply was called for from the petitioner - violation of principles of natural justice - HELD THAT - There is no doubt that the impugned orders have been passed in violation of principles of natural justice in as much as the petitioner was not allowed to cross examine the officers of the 2 nd respondent s who had taken possession of the factory of the petitioner under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act 2002 read with Security Interest (Enforcement) Rules 2002 - on this short point alone impugned orders are liable to be set aside and the cases have remitted back to the 1st respondent to pass fresh orders on merits after giving the petitioner an opportunity to cross examine the officers of the 2 nd respondent and after being heard. Denial of transitional credit under the aforesaid provisions of the respective GST Enactments can be justified only if the petitioner did not have unutilised credit of Rs. 10, 83, 115/- as on 30.6.2017. This would have been reflected in the Returns of the petitioner which the petitioner would have filed before the Commercial Tax Department under the provisions of the Tamil Nadu Value Added Tax Act 2006. This aspect can be verified by the Department by drawing informations from its archives under the provisions of the Tamil Nadu Value Added Tax Act 2006 - Proviso to Section 16 (2) of the Tamil Nadu Goods and Service Tax Act 2017 and the Central Goods and Service Tax Act 2017 contemplates that where a recipient fails to pay the supplier of the goods or services or both other than the supply on which tax is payable on reverse charge basis the amount towards the value of supply along with the tax payable thereon within the period of 180 days from the date of issuance of invoice by the supplier an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability along with interest thereon in such manner as may be prescribed. Whether Rule 37 of the respective Goods and Service Tax Rules 2017 were satisfied or not? - HELD THAT - If the petitioner had availed input tax credit on any goods or services or both but failed to pay the supplier thereof for the value of such supply along with the tax payable thereon within the time limit specified under Section 16(2) the petitioner was required to furnish the details of such supply the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in Form GSTR-2 for the month immediately following the period of 180 days from the date of issue of the invoice - If the petitioner has not paid the amount as is contemplated under 2nd proviso to Section 16 (2) of the respective GST enactments the respondent will be justified in demanding credit availed notwithstanding the fact that the cross-examination of the officers of the 2nd respondent was denied. Therefore notwithstanding the non-availability of the documents such as invoices and the manual registers the petitioner would be entitled to input tax credit as also transitional credit if they were validly availed provided the details were captured and available in the system both at the end of the petitioner and the supplier and in the information furnished by the petitioner in various GSTR Forms with the department. The impugned orders are quashed and the cases are remitted back to the respondent to pass a fresh order on merits and in accordance with law keeping the observation in mind within a period of six months from the date of receipt of this order - Petition allowed by way of remand.

Summary

Issues Involved:
1. Quashing of Impugned Orders for Assessment Years 2017-2018 & 2018-2019.
2. Compliance with procedural requirements under TNGST and CGST Acts.
3. Denial of Input Tax Credit (ITC) and Transitional Credit.
4. Cross-examination of officers and principles of natural justice.

Summary:

Issue 1: Quashing of Impugned Orders for Assessment Years 2017-2018 & 2018-2019
The petitioner filed W.P. No. 11637 of 2020 to quash the Impugned Orders dated 05.05.2020 for the Assessment Years 2017-2018 & 2018-2019. The Court allowed the petitioner to file a separate writ petition for the Assessment Year 2018-19, leading to W.P. No. 27562 of 2023.

Issue 2: Compliance with procedural requirements under TNGST and CGST Acts
The Impugned Orders followed a Show Cause Notice dated 20.11.2019 under Section 74(1) of the CGST Act, 2017, and TNGST Act, 2017, proposing to reject the entire Input Tax Credit due to the absence of relevant documents. The petitioner challenged the invocation of Section 74(1) of the TNGST Act, arguing that similar provisions under the CGST Act were not invoked, but this objection was overruled as the provisions are pari materia.

Issue 3: Denial of Input Tax Credit (ITC) and Transitional Credit
The Show Cause Notice calculated interest at 24% on the ITC availed without supporting documents and proposed a 100% penalty. The petitioner argued that the business premises were under lock and seal by the second respondent, hindering proper response. The Court noted that denial of transitional credit could only be justified if the petitioner did not have unutilized credit as of 30.06.2017, which could be verified from legacy records.

Issue 4: Cross-examination of officers and principles of natural justice
The petitioner requested to cross-examine the officers who took possession of the factory, but this was denied, violating principles of natural justice. The Court held that the petitioner should have been allowed to cross-examine the officers to establish the validity of the ITC. The Court quashed the impugned orders on this ground and remitted the case back to the first respondent to pass fresh orders after allowing cross-examination and verifying electronic records.

Conclusion:
The Court quashed the impugned orders and remitted the case back to the first respondent to pass fresh orders on merits within six months, allowing the petitioner to cross-examine the concerned officers and verify electronic records. The petitioner was directed to cooperate with the respondents, failing which appropriate orders would be passed based on available records. The writ petitions were allowed by way of remand with no costs.