2024 (12) TMI 129 - HC - GST

Challenge to to the DRC-07 notice - reversal of wrongly availed ITC in the petitioner's GSTR-3B filed - HELD THAT - The notice had been issued by the first respondent to the petitioner, which has also been duly responded. Pursuant to the personal hearing that had been granted to the petitioner, the first respondent had considered the case in detail and had passed orders on 17.10.2023. With respect to the third item in the demand notice, which arises out of wrong availing of ITC credit by the petitioner, the first respondent had recorded the factual finding that the petitioner had reversed the wrong claim even as early as on 28.02.2021 in their GSTR-3B for the month of February, 2020. In the counter affidavit, the second respondent had categorically admitted that the petitioner had reversed the said wrongly availed ITC, however had expressed his inability, as the portal would not permit such reversal. The said reason given by the second respondent is wholly unacceptable. He ought not to have included the said demand when the first respondent himself had ordered such reversal to be treated as a payment under Section 73 of the CGST Act, 2017. The demand in respect of the said account in item No.3 is wholly erroneous and therefore, it is inclined to set aside the said demand under item No.3 of the impugned DRC-07 notice. In respect of the other claims as submitted by the learned counsel for the petitioner, he is at liberty to approach the concerned Authority seeking amnesty. The Writ Petition is partly allowed setting aside the demand in respect of item No.3 of the impugned DRC-07 notice dated 15.05.2024 and in all other aspects, the petitioner is at liberty to workout his remedy as available in law.

Summary

Issues:
Challenge to DRC-07 notice demanding payment; Reversal of wrongly availed ITC; Error in demand notice; Applicability of amnesty provision; Maintainability of writ petition.

Analysis:
The writ petition challenges a DRC-07 notice issued by the second respondent, demanding payment for three counts. The petitioner's counsel argued that the first respondent had already determined and rectified the wrongly availed Input Tax Credit (ITC) as per Section 73 of the CGST Act, 2017. The petitioner sought to set aside the portion of the DRC-07 notice related to this issue, while proposing to utilize the amnesty provided by the Department for the other two claims.

In response, the Senior Standing Counsel for the respondents contended that the inclusion of the amount in the demand notice was not erroneous, suggesting that any alleged error could be rectified through an appeal. He referenced provisions of the GST Act, 2017 and a previous judgment to support the validity of the DRC-07 notice. The counter affidavit filed by the second respondent also highlighted the absence of a provision on the portal to adjust or enter the already paid/reversed amount.

The court considered the submissions from both sides. It noted that the first respondent had already acknowledged and accepted the reversal of the wrongly availed ITC by the petitioner, treating it as payment under the CGST Act, 2017. Despite the efforts of the standing counsel to defend the DRC-07 notice, the court found no specific justification for the demand in question. The court deemed the demand related to the ITC reversal as wholly erroneous and set it aside, granting the petitioner the freedom to seek amnesty for the remaining claims.

Ultimately, the court partially allowed the writ petition, specifically setting aside the demand linked to the ITC reversal while permitting the petitioner to pursue legal remedies for other aspects. No costs were awarded, and the connected Miscellaneous Petitions were closed as a result of the judgment.