2025 (1) TMI 1419 - HC - GST

Violation of principles of natural justice - passing of Input Tax Credit on the strength of the fake invoices without supply of goods by a fictitious supplier - whether the petitioner should be granted an opportunity to contest the allegations of availing Input Tax Credit (ITC) based on fake invoices? - HELD THAT - The impugned Order-in-Original 04/2022-GST dated 19.12.2022. The petitioner shall deposit 25% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent within a period of four weeks from the date of receipt of a copy of this order. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the petitioner should be granted an opportunity to contest the allegations of availing Input Tax Credit (ITC) based on fake invoices and whether the impugned Order-in-Original should be set aside or remanded for reconsideration. Additionally, the Court examined whether the petitioner should be allowed to deposit a portion of the disputed taxes to facilitate the lifting of bank attachments and to allow for a fair hearing.

ISSUE-WISE DETAILED ANALYSIS

1. Legal Framework and Precedents:

The case revolves around the provisions of the Goods and Services Tax Act, 2017, specifically concerning the availing of Input Tax Credit based on invoices from fictitious suppliers. The legal framework requires genuine transactions for the availing of ITC. The Court referenced a similar case, M/s. K. Balakrishnan, Balu Cables vs. O/o. the Assistant Commissioner of GST & Central Excise, where the matter was remanded for reconsideration subject to the payment of a portion of the disputed taxes.

2. Court's Interpretation and Reasoning:

The Court considered the petitioner's contention that they were not given a fair opportunity to present their case due to their failure to respond to the Show Cause Notice and attend the personal hearing. The Court acknowledged the petitioner's willingness to remit the entire tax and their request for a chance to explain the alleged discrepancies.

3. Key Evidence and Findings:

The investigation by the Headquarters' Preventive Unit revealed that the petitioner availed ITC based on invoices from M/s. Mahendra Enterprises and M/s. Vijay Lakshmi Industries, which were alleged to be fictitious suppliers. The petitioner did not initially respond to the Show Cause Notice or attend the personal hearing, leading to the confirmation of the proposal in the impugned order.

4. Application of Law to Facts:

The Court applied the precedent set in the case of M/s. K. Balakrishnan, Balu Cables, allowing for the possibility of remanding the matter for reconsideration. The Court required the petitioner to deposit 25% of the disputed taxes as a condition for lifting the bank attachment and for the matter to be treated as a show cause notice.

5. Treatment of Competing Arguments:

The petitioner's argument centered on their readiness to comply with tax obligations and their request for a fair opportunity to present their case. The respondent did not raise serious objections to the petitioner's request for lifting the bank attachment, provided the petitioner complied with the conditions set by the Court.

6. Conclusions:

The Court concluded that the petitioner should be given an opportunity to submit objections and present their case, subject to the condition of depositing 25% of the disputed taxes. The Court emphasized the importance of a fair hearing and compliance with tax obligations.

SIGNIFICANT HOLDINGS

The Court held that the impugned Order-in-Original would be set aside, provided the petitioner deposits 25% of the disputed taxes within four weeks. The Court stated, "Failure to comply with the above condition viz., payment of 25% of disputed taxes within the stipulated period i.e., four weeks from the date of receipt of a copy of this order shall result in restoration of the impugned order."

The Court also established that upon compliance, the impugned order would be treated as a show cause notice, allowing the petitioner to submit objections and supporting documents within four weeks. The respondent is required to consider these objections and pass orders in accordance with the law, ensuring a reasonable opportunity for the petitioner to be heard.

The Court's final determination was to provide the petitioner with a fair opportunity to contest the allegations, subject to the stipulated conditions, ensuring compliance with the principles of natural justice and the statutory framework governing GST.