Case Law Details
Phoenix Marketing Solution Vs Deputy State Tax Officer 2 (Madras High Court)
The Madras High Court considered writ petitions challenging assessment orders relating to the financial years 2022-23 and 2023-24. The petitioner had availed input tax credit (ITC) in respect of supplies allegedly made by M/s. Rathod Enterprise. Show cause notices were issued under Section 74 of the applicable GST enactments requiring the petitioner to explain why tax, interest and penalty should not be imposed for alleged unlawful availment and utilisation of ITC. The petitioner replied that the services of Rathod Enterprise had been utilised for its event management business at short notice under an agreement with the service provider.
The petitioner’s counsel submitted that the services had in fact been availed, that a substantial portion of the tax demand had already been recovered, that some amounts remained available in the electronic credit ledger, and sought an opportunity to produce relevant documents before the respondent to establish that the ITC had been validly availed. The Government Counsel submitted that the petitioner’s reply had already been considered and that cogent reasons had been recorded while confirming the proposals.
The Court noted that both impugned orders were substantially similar. The assessment order recorded that the agreement between the petitioner and Rathod Enterprise was not original. It further recorded that the agreement dated 23.12.2022 was executed on stamp paper that had actually been purchased on 04.05.2023. The statement of the stamp vendor indicated that the stamp paper had originally been purchased on 04.05.2023 and had not been sold by her, having been stolen. The order therefore concluded that the agreement was not original or legal, that the contractual agreement between the parties was bogus, and consequently rejected all invoices.
The Court also noted the respondent’s factual findings that the original agreement had not been produced, the agreement pre-dated the purchase of the stamp paper on which it was executed, and the invoice had been issued by Rathod Enterprise after cancellation of its GST registration. The petitioner’s counsel was unable to controvert these findings. Holding that no infirmity was made out in the impugned orders to warrant interference in the exercise of its discretionary jurisdiction, the Madras High Court dismissed both writ petitions without costs and closed the connected miscellaneous petitions.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Assessment orders relating to financial orders 2022-23 and 2023-24 are impugned in these writ petitions.
2. The petitioner had availed of input tax credit (ITC) during the aforesaid periods in relation to supplies allegedly made by M/s.Rathod Enterprise. Show cause notices under Section 74 of the applicable GST enactments were issued to the petitioner calling upon the petitioner to show cause as to why tax, interest and penalty should not be imposed for unlawful availment and utilisation of ITC. The petitioner replied to such show cause notices by stating that the services of Rathod Enterprise were utilised by the petitioner in relation to its
3. Learned counsel for the petitioner submits that services were availed of in relation to event management business at short notice by executing an agreement with the service provider. He also submits that a substantial portion of the tax demand was recovered and that some amounts are still available in the electronic credit ledger of the petitioner. He seeks an opportunity to submit relevant documents before the respondent to establish that ITC was validly availed of.
4. Countering these submissions, Ms.Amirta Poonkodi Dinakaran, learned Government Counsel, points out that the petitioner’s reply was considered and that cogent reasons were recorded for confirming the proposals.
5. Both the orders are in substantially similar language. The operative paragraphs of order dated 18.07.2024 in W.P.No.18739 of 2026 are set out below:
“On verification made with agreement made between TV. Phonenix Marketing TVM. Rathod Enterprise (GSTIN: Solution (GSTIN: 33AMUPM7039BIZY) and 24CKHPN2577A1ZC) with document no 20AC 417308 dated: 23.12.2022 issued by S.Amutha, Stamp Document Seller with Reg No. 03/2021 at Karkudal which located in Cuddalore district, Tamilnadu was not original.
In the reference 11% cited, the statement given by the vendor who sold the stamp paper stating that the stamp paper value of Rs. 20/ SI.No. of 20AC 417308 was originally purchased on 04.05.2023 in Virudhachalam. Treasury and also said that she did not sold the mentioned stamp paper, it was theft while she gone through and attend her daughter function.
In this circumstance, on verification of agreement made with Tvl. Phonenix Marketing Solution (GSTIN: 33AMUPM7039B1ZY) and Tvl. Rathod Enterprise (GSTIN: 24CKHPN2577A1ZC) which was made on 23.12.2022 and found that the stamp paper was actually purchased on 04.05.2023, but the agreement was made on 23.12.2022.
Hence it shows the agreement of contracts made was not original and legal, With regards to the above it clearly shows that the agreement made between the taxpayer was bogus. As agreement of business was bogus the business transaction document are hence bogus as there is no contractual agreement between Tvl. Phonenix Marketing Tvl. Rathod Enterprise (GSTIN: Solution (GSTIN: 33AMUPM7039B1ZY) and 24CKHPN2577A1ZC). Hence all invoice submitted are rejected as there is no contract between them.”
As can be seen from the extract, the respondent has examined the agreement between the petitioner and Rathod Enterprise and recorded the following factual findings:
(i) The original of the agreement was not submitted.
(ii) The agreement is dated 23.12.2022, but such agreement was executed on stamp paper purchased on 04.05.2023.
(iii) The invoice was issued by Rathod Enterprise after cancellation of the GST registration.
6. Learned counsel for the petitioner is unable to controvert the above findings. In these circumstances, I find no infirmity in the orders impugned herein warranting interference in exercise of discretionary jurisdiction.
7. Hence, these writ petitions are dismissed without any order as to costs. Consequently, connected miscellaneous petitions are closed.
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