Court rejects GST writ petition over filing error must use statutory appeal route instead

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Case Name

M/s Lucent Iron And Steel Traders vs Union Of India & Others (High Court of Chhattisgarh at Bilaspur)

WPT No. 212 of 2024

Date: 2nd January 2025

Key Takeaways

1. Alternative remedy rule is strong: Courts won’t entertain writ petitions when proper statutory appeal mechanisms exist under tax laws
2. GST filing errors have serious consequences: Even inadvertent mistakes can lead to substantial recovery demands with interest and penalties
3. Pre-deposit requirements don’t justify bypassing appeals: The 10% pre-deposit requirement for GST appeals isn’t considered a valid reason to directly approach High Court
4. Exceptional circumstances are narrowly defined: Only fundamental rights violations, natural justice breaches, jurisdictional excess, or constitutional challenges can bypass statutory remedies

Issue

The central legal question was: Can a taxpayer directly approach the High Court under Article 226 to challenge a GST recovery order when statutory appeal remedies are available under Section 107 of the CGST Act?

Facts

M/s Lucent Iron and Steel Traders is a proprietorship firm run by Mrs. Meenu Lata Prajapati, dealing in steel products. In October 2018, their tax consultant made a serious blunder - they accidentally used data from a completely different company (M/s Lucent Steel Pvt. Ltd.) while filing the GSTR-3B return.

This mistake was huge! It resulted in:

• Incorrect declaration of taxable supplies
• Wrongful claiming of Input Tax Credit worth ₹5,02,39,154/-

When the company realized this error, they immediately informed both Central and State GST authorities on November 30, 2018. They made multiple representations explaining it was an honest mistake with no fraudulent intent.

However, the GST department wasn’t convinced. They issued a Show Cause Notice under Section 73 of the CGST Act, demanding recovery of the wrongfully claimed ITC along with interest and penalties. On April 26, 2024, the Joint Commissioner passed an order confirming the demand.

Arguments

Petitioner’s Arguments:

The company argued that:

• The error was completely inadvertent, committed by their consultant
• They immediately informed authorities once they discovered the mistake
• There was no intent to defraud or suppress facts
• The statutory appeal process requiring 10% pre-deposit (around ₹50 lakhs) was too burdensome and made the remedy “inadequate and ineffective”
• They should be allowed to rectify their GSTR-3B return for October 2018

Respondent’s Arguments:

The GST department contended that:

• A proper statutory remedy exists under Section 107 of the CGST Act
• The petitioner should use the appellate process before the CGST Appellate Tribunal
• Writ jurisdiction shouldn’t be invoked when alternative remedies are available
• They cited the Supreme Court case Assistant Commissioner of State Tax and others Vs. Commercial Steel Limited [2022 (16) SCC 447] to support their position

Key Legal Precedents

The court relied heavily on the Supreme Court decision in Assistant Commissioner of State Tax and others Vs. Commercial Steel Limited [2022 (16) SCC 447].

The Supreme Court laid down clear guidelines in paragraphs 10 and 11 of that judgment:

Para 10 established that while alternative remedy isn’t an absolute bar to writ petitions, they can only be entertained in exceptional circumstances:

• Breach of fundamental rights
• Violation of principles of natural justice
• Excess of jurisdiction
• Challenge to the constitutional validity of statute or delegated legislation

Para 11 emphasized that courts shouldn’t entertain writ petitions when none of these exceptions apply, and factual assessments should be left to appellate authorities.

The court also referenced Section 73 of the CGST Act (recovery provisions), Section 107 of the CGST Act (appeal provisions), and Article 226 of the Constitution (writ jurisdiction).

Judgement

The court dismissed the writ petition. Here’s the reasoning:

Court’s Decision: The petition was not maintainable because:

1. No exceptional circumstances existed: None of the four exceptions from the Supreme Court precedent were established
2. No violation of natural justice: The petitioner was properly served with a show cause notice dated December 27, 2023. The court noted that the petitioner actually failed to respond to several communications from the department
3. Statutory remedy available: Section 107 of the CGST Act provides a proper appeal mechanism that the petitioner hadn’t used
4. Following Supreme Court guidance: The court felt bound by the Assistant Commissioner of State Tax case and refused to exercise extraordinary writ jurisdiction

Final Order: The petition was disposed of at the preliminary stage, but the court gave liberty to the petitioner to pursue legal remedies against the impugned order through proper channels.

FAQs

Q1: What does this mean for the steel trading company?

A: They’ll have to file an appeal before the CGST Appellate Tribunal under Section 107, which requires paying 10% of the disputed amount upfront (around ₹50 lakhs in this case).

Q2: Was the company’s mistake really that serious?

A: Yes, accidentally filing another company’s data led to wrongful ITC claims of over ₹5 crores. Even honest mistakes can have severe consequences under GST law.

Q3: Could they have won if they had used the proper appeal process?

A: The court made no comments on the merits of their case. The appeal tribunal will have to examine whether the mistake was genuine and if relief can be granted.

Q4: Why didn’t the court consider the 10% pre-deposit requirement as making the remedy inadequate?

A: Courts generally don’t consider pre-deposit requirements as making statutory remedies ineffective. This is seen as a procedural requirement, not a barrier to justice.

Q5: What should taxpayers learn from this case?

A: Always use statutory appeal mechanisms first before approaching High Courts. Writ petitions in tax matters are only entertained in very exceptional circumstances involving constitutional or jurisdictional issues.

Q6: Can they still get relief for their genuine mistake?

A: Yes, but they’ll need to pursue it through the proper CGST appellate process, starting with the Appellate Tribunal under Section 107 of the CGST Act.