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TMI Blog2024 (1) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... ion clauses (c) and (d) of Section 17(5) of the CGST Act, 2017 will not be applicable in the case of the petitioner and the petitioner would be entitled to avail ITC on plant and machinery. Thereafter, a show cause notice under Sections 7, 9, 50 and 73 of the RGST Act, 2017 was issued to the petitioner. In the present case, once notice under Section 61 was issued to the petitioner requiring its explanation pointing out certain discrepancies from the return, the proper officer, before he could assume jurisdiction to issue show cause notice under Section 73 of the Act, was mandated under the law to consider the explanation offered by the petitioner. The submission of learned counsel for respondents that the power under Section 73 could be invoked irrespective of whether satisfaction in terms of Section 61(3) was arrived at or not is misplaced both in law and on facts. Where show cause notice is based on discrepancies found in the return and not on any other independent material, the proper officer is obliged under the law to follow the mandate of Section 61 before invoking jurisdiction under Section 73 of the Act. Present is not a case that on any other material, the proceedings un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the notice, it was further detailed out that the ITC on payment made to M/s Kone Elevators India Pvt. Ltd. for purchase of lift and payment made for purchase of Air Conditioners were under block credit as per Section 17(5) of the RGST Act, 2017 and therefore, the same were not available to be availed. On such consideration, it was stated that the petitioner was liable to reverse the tax amounting to Rs.18,44,884/- (SGST amounting to Rs.9,22,442/- and CGST amounting to Rs.9,22,442/-), along with interest under Section 50 of the RGST Act. The petitioner was called upon to furnish explanation on or before 15.09.2023. 4. In response to the said notice, the petitioner submitted a preliminary reply on 15.09.2023. Though in that reply, further time was sought to furnish detailed reply till 01.10.2023, at the same time, the petitioner sought to respond by submitting that the company was engaged in the business of operating hotels and payments made to various persons for purchase of elevators and Air Conditioners were made. According to the petitioner, the said equipments are plant and machinery for the purpose of business and are necessary for making outward supply of services to hotel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, it is not permissible under the law to still retain jurisdiction to draw proceedings under Section 73 on the basis of discrepancy found in the return. 11. Per contra, learned counsel for the respondents would submit that firstly; the notice under Section 61 which was issued to the petitioner was responded by half-hearted reply. However, in any case, explanation offered by the petitioner was duly considered by the competent authority and only when the explanation was not found acceptable, the authority proceeded to assume jurisdiction under Section 73. He would also submit that the power under Section 73 could be invoked in terms of provisions contained in sub-section (1) of Section 73 and is, therefore, not confined to discrepancies found in the scrutiny of return. 12. Relying upon the decision of the Division Bench of Allahabad High Court in the case of Nagarjuna Agro Chemicals Pvt. Ltd. Versus State of U.P. and Another (Writ Tax No.336/2023), it is submitted that power under Sections 61 and 73 are independent and separate and it cannot be said that in case where no scrutiny is undertaken, power under Section 73 could not be invoked. 13. We have heard learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dues under section 73 or section 74." 16. Sub-Section (1) of Section 61 authorises the proper officer to scrutinise the return and related particulars furnished by the registered persons to verify the correctness of the return and inform him of the discrepancies noticed, if any, in prescribed manner and seek his explanation thereto. Sub-Section (2) and Sub-Section (3) deal with different contingencies. While sub-section (2) provides for the course of action that may be adopted in a case where explanation is found acceptable, sub-section (3) deals with the procedure to be followed in case no satisfactory explanation is furnished within a stipulated period or where after accepting discrepancy, the person concerned fails to take corrective measures in its return. 17. A fair, logical construction and interpretation of the aforesaid provision would mean that once the proper officer undertakes scrutiny of return and comes across any discrepancies in the said return, he may seek explanation. Where explanation is found acceptable, the registered person is required to be informed accordingly and no further action is required to be taken in this regard. It is only when no satisfactory ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on explanation also, we do not find any such consideration in the said notice. The authority has reproduced the provision contained in Section 17(5) of the Act and it has been recorded as below:- "As such, it appears that the input tax credit claimed in the GSTR 3B returns is not available as per section 17(5) of RGST Act and Central GST Act for 2017-18 and is inadmissible in accordance with law." 22. The petitioner has specifically stated in its reply that the lift and air conditioners formed part of plant and machinery therefore it is entitled to avail ITC. This specific assertion was not considered anywhere in the show cause notice. Therefore, even assuming that in the show cause notice itself, application of mind could be reflected, we find that the contents of notice under Section 73 fall short of this legal requirement. 23. The submission of learned counsel for respondents that the power under Section 73 could be invoked irrespective of whether satisfaction in terms of Section 61(3) was arrived at or not is misplaced both in law and on facts. Where show cause notice is based on discrepancies found in the return and not on any other independent material, the proper officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SMT -12 was issued to the petitioner on 29.09.2023. This clearly refers to order of acceptance of reply against notice issued under Section 61 of the Act. The communication says that with reference to reply submitted by the petitioner, details of which are mentioned in the table given therein the reply submitted by the petitioner has been found to be satisfactory and no further action is required to be taken in the matter. This communication is clearly referable to the provisions contained in Section 61(2) read with Rule 99 of the CGST Rules. Sub-Section (2) of Section 61 clearly states that in case explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard. We may also carefully refer to the provisions contained in Rule 99 which read as below:- "99. Scrutiny of returns.- (1) Where any return furnished by a registered person is selected for scrutiny, the proper officer shall scrutinize the same in accordance with the provisions of section 61 with reference to the information available with him, and in case of any discrepancy, he shall issue a notice to the said person in FORM GST ASMT-10, informing him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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