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.
