Madurai Bench of Madras High Court Quashes Writ Petitions Regarding Input Tax Credit

Case Name:

Tvl. Kavin HP Gas Gramin Vitrak vs. The Commissioner of Commercial Taxes and The Deputy State Tax Officer-1 (High court of Madras)

W.P.(MD).Nos.7173 and 7174 of 2023

Key Takeaways:

1. The Madurai Bench of Madras High Court quashed the writ petitions challenging the belated claim of Input Tax Credit (ITC) for the financial years 2017-2018 and 2018-2019.
2. The court directed the respondents to permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply/sales without paying taxes.
3. The matter was remitted back to the authorities for reconsideration.

Synopsis:

In this case the Madurai Bench of the Madras High Court. The case involves Writ Petitions (MD) Nos. 7173 and 7174 of 2023, along with W.M.P. (MD) Nos. 6764 and 6765 of 2023. The case concerns Tvl.Kavin HP Gas Gramin Vitrak, represented by Proprietor Palaniyandi Arun, and the Commissioner of Commercial Taxes, as well as the Deputy State Tax Officer-1.

The petitioner, Tvl.Kavin HP Gas Gramin Vitrak, is challenging the impugned orders dated 16.08.2022 issued by the 2nd respondent regarding the belated claim of Input Tax Credit (ITC) for the financial years 2017-2018 and 2018-2019. The petitioner is a business dealing with Petroleum Gases and other Gaseous Hydrocarbons in Urangampatty and is registered with the respondent department in GSTIN.33BAGPA0449A1ZM.

The main contention of the petitioner is that the claim of ITC can only be made through Form GSTR-2, which was not notified by the GSTN. The petitioner also argued that the filing of GSTR-3B is not meant for claiming ITC and that the reversal of input tax for belated claim as per Section 16(4) of TNGST Act is not applicable.

The 2nd respondent, on the other hand, argued that the writ petitions are not maintainable since the petitioner has an alternative remedy to prefer an appeal before the jurisdictional Appellate Deputy Commissioner (GST Appeals). The respondent also stated that the burden of proof lies with the taxable person and that the petitioner failed to file objections with supportive documents.

After hearing both parties, the Hon’ble Mrs. Justice S.Srimathy allowed the writ petitions and quashed the impugned orders. The court directed the respondents to permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply/sales without paying taxes. The matter was remitted back to the authorities for reconsideration.

The judgment also referenced previous judgments from the High Court of Punjab and Haryana and the Madras High Court, which supported the petitioner’s contentions.

FAQ:

Q1.What were the writ petitions about?

A1.The writ petitions challenged the belated claim of Input Tax Credit (ITC) for the financial years 2017-2018 and 2018-2019.

Q2.What was the outcome of the case?

A2.The Madurai Bench of Madras High Court quashed the impugned orders and directed the respondents to permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply/sales without paying taxes.

Q3.What happens next?

A3.The matter was remitted back to the authorities for reconsideration

These writ petitions are filed for writ of Certiorari to quash the impugned

orders, dated 16.08.2022. The writ petition in W.P.(MD)No.7173 of 2023 is

filed for the financial year 2017-2018 and W.P.(MD)No.7174 of 2023 is filed

for the financial year 2018-2019.

2. The petitioner is doing business related to Petroleum Gases and other

Gaseous Hydrocarbons in Urangampatty and registered with the respondent

department in GSTIN.33BAGPA0449A1ZM and was promptly filing monthly

returns. Based on the scrutiny and verification of GSTR-3B returns filed in the financial year 2017-2018 and 2018-2019, the 2nd respondent issued notice dated 27.04.2022 and directed the petitioner to show cause why there was a belated claim of Input Tax Credit (ITC) and also directed to remit back the same as wrong claim of ITC and proposed to reverse the same. Further it is alleged that the petitioner had claimed on the purchase of Petroleum product. The petitione submitted that due to financial crisis the petitioner had submitted GSTR-3B physically and the same was already explained to the respondents in person through his Accountant and hence the allegation by the respondents that the said claim is false cannot be accepted.

3. The contention of the petitioner is that he had also explained the fact

that the claim of ITC is described under Rule 60 of the TNGST Rules and the

Form prescribed is Form GSTR-2, but the same was not notified. Moreover,

the filing of GSTR-3B is to avail the input tax credit and not for claiming the same. So the reversal of input tax for belated claim as per Section 16(4) of TNGST Act is not applicable, since the filing of GSTR3B is not meant for claim of input tax credit. The further contention of the petitioner is that the sales made to the petitioner and the tax collected from the petitioner were duly reported by other end supplier through their respective GSTR-1 and the petitioner could not claim the same since Form GSTR-2 is not notified. Hence,the petitioner has accounted the purchases and credited the tax payment made through tax invoice, claimed ITC in the books of accounts and availed the same through GSTR-3B filed physically. Hence, the allegation of belated claim of ITC itself is false and misleading.

4. However, to the shock of the petitioner, the 2nd respondent has passed

the impugned order and confirmed the proposal with regard to the alleged

belated claim of input tax credit. The 2nd respondent has not at all dealt with the specific contention that the claim of the ITC can be made only through GSTR-2 and the said Form was not notified and the filing of GSTR-3B is not meant for claiming of ITC. The petitioner's specific contention of the petitioner is that the petitioner had claimed ITC without violation of procedures contemplated under the Act and rules. When the petitioner is entitled to ITC as per the provisions, disallowing the same by observing that the returns are not filed in prescribed time and the same is totally irrelevant. Moreover, the respondents had passed a non-speaking order, without meeting out the specific contentions of the petitioner. Moreover, GSTR-3B is not at all returned as prescribed in Section 39 of the TNGST Act. As per Notification No.49 of 2019 (Central Tax), dated 09.10.2019, the Government declared that the reconciliation statement GSTR-3B may be treated as GSTR-3 in retrospective manner and the same is not correct and the same

is against the Constitution. Hence, the petitioner has approached this Court to quash the impugned order.

5. The 2nd respondent had filed counter affidavit in both the writ petitions

stating that the writ petitions are not maintainable since the petitioner has an alternative remedy to prefer an appeal before the jurisdictional Appellate Deputy Commissioner (GST Appeals). Prima facie the revision of assessment was made out based on the scrutiny of GSTR-3B returns and hence notices in Form- GST-DRC-01A (Rule 142(i)) were issued to explain the issue with the documentary evidences why there was a belated claim of ITC. The statute is very clear that the burden of proof is lying with the taxable person and he has to prove that there is no evasion of tax. Based on the belated filing of returns GSTR-3B, a notice, dated 03.03.2022, was issued proposing to levy tax under Section 73(5) of the Act, 2017. The petitioner has not filed any objections with

the supportive documents till the show cause notice in Form-GST-DRC-01

(Rule 142(I)), dated 27.04.2022, was issued. In the absence of objections, the

said show cause notice in Form-GST-DRC-01 Rule 142(1) dated 27.04.2022 was issued proposing to levy tax and penalty, calling for objections to the

proposal, but the petitioner had not submitted any objections. Thereafter,

personal hearing was granted on 07.07.2022 in order to grant natural justice.

But the petitioner has not attended the personal hearing with supportive

documents till the passing of order in Form-GST DRC-07 (Rule 142 (5)).

When the petitioner has not filed any objections, it would be evident that the

petitioner is not having any record or documents to prove his case. As per the

provisions of Act and Rules especially Rule 61(5) 2017, every taxable person

has to file monthly return for every month on or before 20th of the subsiding

month. The taxable person is mandated to file monthly returns only

electronically and not by manually. Since the petitioner had not filed any

objections and had not attending the personal hearing, the respondents left with

no other option than to confirm the proposal already made in the notice.

Accordingly, order, dated 16.08.2022, was passed. Therefore, the 2nd respondent

prayed to dismiss the writ petitions.

6. Heard Mr.Raja Karthikeyan, learned Counsel appearing for the

petitioner in both the writ petitions and Mr.A.K.Manikkam, learned Special

Government Pleader appearing for the respondents in both the writ petitions

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and perused the records.

7. The contention of the petitioner is that as per Section 38 of the GST

Act read with Rule 60 of the TNGST Rules, the ITC shall be claimed through

GSTR-2, GSTN had not provided the facility of GSTR-2 till now. The Learned

Counsel appearing the petitioner specifically submitted that it is due to

technical reasons and the mistake ought to be rectified by the GST Council,

unfortunately the GST Council had not taken up the issue to rectify the same.

Since the GSTR-2 was not notified, which is meant for claiming ITC, hence the

petitioner could not claim the ITC within the prescribed time. In the counter

affidavit, the respondents have not denied the allegation. Further the 2nd

respondent has only stated that any Form can be filed only electronically, that

too it has to be filed on or before 20th of every month. When the said GSTR-2

Form is not available, then electronical filing is not possible, then taxable

person cannot be expected to file the Form electronically. Therefore, the basis

of initiation of the proceedings itself is not sustainable.

8. The petitioner further submits the claim of ITC defined under Rule 60,

which reads as under:

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W.P.(MD).Nos.7173 and 7174 of 2023

“Rule 60:- Form and manner of furnishing details of inward supplies:

1....

2....

3. The registered person shall specify the inward supplies in respect of

which he is not eligible, either fully or partially for input tax credit in

Form GSTR-2 where such eligibility can be determined at the invoice

level”

When the Rules specifically prescribes GSTR-2 to specify the inward supplies

for claiming ITC, when the said form is not notified, the petitioner cannot be

expected to file the same to claim ITC.

9. The respondents without giving any opportunity to file the returns by

notifying the Form GSTR-2, cannot expect the taxable person to file returns. In

fact, the petitioner has no intension to violate the provisions of the Act. In

order to show his bonafide, he has filed physically. Moreover, all tax liability is

paid and there is no loss to the department. Moreover, the petitioner has also

claimed financial crisis. Even though the financial crisis cannot be a ground for

not filing the returns in time, not notifying of Form GSTR-2 is clearly a ground

to consider the petitioner's claim of belated returns.

10. The learned Counsel appearing for the petitioner relied on the

judgment rendered by the High Court of Punjab and Haryana in the case of

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Hans Raj Sons Vs. Union of India and others in CWP No.36396 of 2019,

dated 16.12.2019, wherein the Hon’ble Court has allowed the tax payer to file

the return either electronically or manually, if the portal is not opening. In the

said judgment, the High Court of Punjab and Haryana has relied on another

judgment rendered in CWP No.30949 of 2018, in the case of Adfert

Technologies Private Limited Vs. Union of India and others, dated

04.11.2019. The same issue was also considered by the Madras High Court in

W.P.No.29676 of 2019, dated 06.10.2020, wherein it is stated as under:

“19. Admittedly, the 31st of March 2019 was the last date by

which rectification of Form – GSTR 1 may be sought. However, and also

admittedly, the Forms, by filing of which the petitioner might have

noticed the error and W.P. No.29676 of 2019 sought amendment, viz.

GSTR-2A and GSTR-1A are yet to be notified. Had the requisite Forms

been notified, the mismatch between the details of credit in the

petitioner’s and the supplier’s returns might well have been noticed and

appropriate and timely action taken. The error was noticed only later

when the petitioners’ customers brought the same to the attention of the

petitioner.

20. In the absence of an enabling mechanism, I am of the view

that assessee should not be prejudiced from availing credit that they are

otherwise legitimately entitled to. The error committed by the petitioner

is an inadvertent human error and the petitioner should be in a position

to rectify the same, particularly in the absence of an effective, enabling

mechanism under statute.

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21. This writ petition is allowed and the impugned order set

aside. The petitioner is permitted to re-submit the annexures to Form

GSTR-3B with the correct distribution of credit between IGST, SGST

and CGST within a period of four weeks from date of uploading of this

order and the respondents shall take the same on file and enable the

auto-population of the correct details in the GST portal. No costs.”

In the above said order, this Court has clearly held that in the absence of any

enabling mechanism, the assessee cannot be prejudiced by not granting ITC.

Therefore, following the aforesaid judgments this Court is inclined to set aside

the impugned order.

11. The next contention of the petitioner is that the ITC can be claimed

through GSTR-3B, but GSTN has not permitted to file GSTR-3B in online if

the dealers had not paid taxes on the outward supply / sales. In other words, if

the dealer is not enabled to pay output tax, he is not permitted to file GSTR-3B

return in online and it is indirectly obstructing the dealer to claim ITC. In the

present case the petitioner was unable to pay output taxes and so the GSTN not

permitted to file GSTR-3B in the departmental web portal it is constructed that

the petitioner had not filed GSTR-3B online, that resulted the dealer unable to

claim his ITC in that particular year in which he paid taxes in his purchases.

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Hence if the GSTN provided option for filing GSTN without payment of tax or

incomplete GSTR-3B, the dealer would be eligible for claiming of input tax

credit. The same was not provided in GSTN network hence, the dealers are

restricted to claim ITC on the ground of non-filing of GSTR-3B within

prescribed time. if the option of filing incomplete filing of GSTR-3B are

provided in the GSTN network the dealers would avail the claim and determine

self-assessed ITC in online. The petitioner had expressed real practical

difficulty. The GST Council may be the appropriate authority but the

respondents ought to take steps to rectify the same. Until then the respondents

ought to allow the dealers to file returns manually.

12. Therefore, following the above said judgments, this Court is inclined

to quash the impugned orders and accordingly the impugned orders are

quashed. The respondents shall permit the petitioner to file manual returns

whenever the petitioner is claiming ITC on the outward supply / sales without

paying taxes. Further the respondents are directed accept the belated returns

and if the returns are otherwise in order and accordance to law, the claim of ITC

may be allowed. Hence, the matter is remitted back to the authorities for

reconsideration.

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13. With the above said observation, the writ petitions are allowed. No

costs. Consequently, connected miscellaneous petitions are closed.

24.11.2023