Case Law Details
Car Chassis Carriers Private Limited & anr Vs Assistant Commissioner (Calcutta High Court)
Calcutta High Court Annuls Authority’s Email Directive to reverse ITC due to retrospective cancellation of supplier’s GST Registration
Introduction: The Calcutta High Court recently delivered a significant judgment in the case of Car Chassis Carriers Private Limited & anr. vs. Assistant Commissioner. The court annulled the authority’s email directive, which instructed the petitioner to reverse input tax credit (ITC) against a supply following the retrospective cancellation of the supplier’s GST registration.
Analysis
In its judgment dated 22.03.2023, the Hon’ble Division Bench of the Calcutta High Court scrutinized the circumstances surrounding the communication sent by the authority via email. The court ruled that the appellant, who had already availed the ITC against the inward supply, could not be compelled to reverse the credit based solely on an email without providing a valid explanation for the cancellation of the selling dealer’s registration.
The court further held that the authority’s procedure, involving the directive to reverse ITC and subsequent enforcement of payment, was not legally sustainable. Such actions were deemed to be in violation of the principles of natural justice. Consequently, the court found that the email directive, dated 20th December 2022, instructing the reversal of input tax credit, lacked legal validity.
Conclusion
The Calcutta High Court’s ruling in the case of Car Chassis Carriers Private Limited & anr. vs. Assistant Commissioner provides clarity regarding the reversal of input tax credit in situations where a supplier’s GST registration is retrospectively cancelled. The court emphasized the importance of a valid basis for cancellation and the principles of natural justice.
The judgment set aside the authority’s email communication and directed them to remit the reversed amount of input tax credit to the appellant within a period of 10 days. This decision demonstrates the court’s commitment to upholding the rule of law and ensuring fair treatment for taxpayers.
Advocate Vinay Shraff and Advocate Priya Sarah Paul represented the petitioners in this case, while Mr. Anirban Ray, learned G. P., Mr. S. Mukherjee, and Mr. D. Ghosh appeared on behalf of the respondents.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. This intra-Court appeal filed by the writ petitioner is directed against the order dated 7th February, 2023 passed in WPA 2616 of 2023 by which the learned Single Bench declined to grant any interim order but directed affidavits to be filed. The appellant is being aggrieved by such order has filed the present appeal.
2. The learned advocates for the parties pray that the writ petition can be taken up for consideration along with the appeal. Accordingly, the writ petition as well as the appeal is taken up for hearing to be decided.
3. We have heard the learned advocates for the parties at length.
4. The short issue which falls for consideration is as to whether the respondent department could have directed the appellant/assessee to reverse the input tax credit against the supply on the ground that they have purchased materials from a dealer whose registration has been cancelled. Admittedly, the details of such cancellation has not been furnished to the appellant. In any event, the appellant having availed the input tax credit against the inward supply cannot be directed to reverse the input tax credit by way of an email communication without mentioning as to what was the basis of the cancellation of registration of the selling dealer.
5. Mr. Shraff, learned counsel for the appellant refers to various decisions of the Courts including the decision of the Hon’ble Supreme Court of India for the proposition that even assuming that a selling dealer’s registration is cancelled, the same will not automatically give right to the department to direct the purchasing dealer to reverse the input tax credit. Again in this regard, reliance is placed on the judgment passed in the case reported in (1998) 109 STC 439.
6. In our considered view, we need not travel far to examine the correctness of the direction issued by the respondent department to the appellant as mentioned above without furnishing any details to the appellant, the respondent could not have directed reversal of the input tax credit, which was availed by the appellant and we are informed that the appellant was compelled to pay the amount and without prejudice to their rights have paid the amount. In our view, the procedure adopted by the authority for directing reversal of the input tax credit and thereafter compelling the appellants to pay the amount is not sustainable in the eye of law but will be in violation of the principles of natural justice. Therefore, we are fully convinced that the manner in which the respondent authority directed the appellants to reverse the input tax credit by way of an email dated 20th December, 2022 is not tenable in law.
5. For the above reasons, both the appeal and the writ petition are allowed and communication sent by the authority by an email dated 20th December, 2022 is set aside with a direction to the authority to remit the amount of input tax credit which was reversed by the appellant on effecting payment without prejudice to their right by transmitting the same amount in the appellants’ electronic credit ledger. This shall be complied with within a period of 10 days from the date of receipt of the server copy of this order. Needless to mention, it is always open to the respondent department to initiate appropriate action in accordance with law, if so advised.
6. There will be no order as to costs.
6. Urgent Photostat certified copy of this order, if applied for, be delivered to the learned advocates for the parties, upon compliance of all formalities
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