Case Law Details
Asian Hotels (East) Ltd. & Anr. Vs Deputy Commissioner of State Tax & Ors. (Calcutta High Court)
The dispute in the case of Asian Hotels (East) Ltd. & Anr. Vs Deputy Commissioner of State Tax & Ors. centers around an order issued on March 30, 2024, under Section 73(9) of the West Bengal/Central Goods and Services Tax Act, 2017. The order raised a demand on Asian Hotels (East) Ltd. for allegedly availing Input Tax Credit (ITC) in violation of Section 16(2)(a) of the Act. The violation was based on the fact that M/s. Crystolyte Facility Management Pvt. Ltd., the supplier from whom Asian Hotels (East) Ltd. had procured services, had closed down its business operations for the financial year 2018-19. This closure was used as the basis for the contention that the ITC availed by Asian Hotels (East) Ltd. was improper.
Submission of Evidence and Legal Precedents
When the writ petition was initially heard, the Calcutta High Court permitted the petitioners to submit supplementary evidence, particularly a printout from the GST portal showing the filing status of M/s. Crystolyte Facility Management Pvt. Ltd. The supplementary affidavit presented in court demonstrated that M/s. Crystolyte Facility Management Pvt. Ltd. had indeed filed its returns in GSTR 3B for the tax period of 2018-19, although its GST status was later updated to “suo motu cancelled” as of April 6, 2021. This evidence suggested compliance with the GST provisions by the supplier during the relevant period.
Relying on a press release from the Ministry of Finance dated May 4, 2018, the petitioners argued that there should be no automatic reversal of ITC from the buyer in cases where the seller defaults in tax payment. The press release clarified that recovery should be directed at the seller, with reversal of credit from the buyer being an option only in exceptional circumstances, such as when the seller is missing, has closed their business, or lacks adequate assets. The petitioners contended that, at the relevant time, the supplier had complied with the GST requirements and no recovery steps were initiated against M/s. Crystolyte Facility Management Pvt. Ltd. The petitioners cited the Division Bench ruling in Suncraft Energy Private Limited & Anr. v. Assistant Commissioner, State Tax, Ballygunge Charge & Ors., which supported their position that this situation did not qualify as an exceptional case warranting action against them.
Court’s Interim Order and Directions
The petitioners’ counsel, Mr. Kanodia, argued that the order dated March 30, 2024, was baseless and perverse, and requested a stay on the order. On the other hand, the respondents’ counsel, Mr. Chakraborty, contended that the petitioners had an alternative remedy available through an appeal, and that the writ petition should not be entertained until this remedy was exhausted.
After hearing both parties and reviewing the materials on record, the Calcutta High Court decided that the writ petition should be heard due to the prima facie case presented by the petitioners. The court granted a stay on the demand raised by the proper officer in the March 30, 2024 order, subject to the petitioners depositing 10% of the disputed tax amount with the GST authorities within seven days. This payment was a condition for maintaining the interim order, which would remain in effect until the end of July 2024 or until further orders, whichever was earlier.
The case was scheduled to appear in the Combined Monthly List of July 2024 for further consideration on July 23, 2024. The court’s decision provided temporary relief to Asian Hotels (East) Ltd., allowing them to challenge the reversal of ITC on the grounds of the supplier’s business closure while ensuring partial compliance through the deposit of a portion of the disputed tax amount.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. Affidavit of service filed in Court today is taken on record.
2. The present writ petition has been filed, inter alia, challenging the order dated 30th March, 2024, passed under Section 73(9) of the West Bengal/Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “said Act”), whereby the respondents have purported to raise a demand on the petitioner no.1 on account of Input Tax Credit (ITC) being availed by the petitioner no.1 in violation of Section 16(2)(a) of the said Act, inter alia, on the ground that M/s. Crystolyte Facility Management Pvt. Ltd., with whom the petitioner no.1 had signed an agreement had closed down its business, for the financial year 2018-19.
3. When the aforesaid writ petition came up for consideration, this Court by an order dated 19th June, 2024, had permitted the petitioners to place the copy of the print out obtained from the GST portal showing status of the return filed by M/s. Crystolyte Facility Management Pvt. Ltd., by way of a supplementary affidavit.
4. Pursuant to such leave, the petitioners have filed a supplementary affidavit in Court today and have disclosed the print out from the portal of the GST authorities which was last updated on 19th June, 2024, wherefrom it would transpire that the GST status of the said M/s. Crystolyte Facility Management Pvt. Ltd is shown as suo motu cancelled with effect from 6th April, 2021. The same also records that returns in GSTR 3B had been filed by the said M/s. Crystolyte Facility Management Pvt. Ltd., for the tax period 2018-19. The aforesaid would prima facie demonstrate that M/s. Crystolyte Facility Management Pvt. Ltd., had been complying with the provisions of the said Act at least up to the tax period of 2018-19.
5. Let the supplementary affidavit filed in Court today be taken on record.
6. By placing reliance on a press release dated 4th May, 2018, issued by the Ministry of Finance, it is submitted that it has been clarified that there shall be no automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller, however, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets, etc. It is submitted that in the instant case, it would be apparent that at the relevant point of time M/s. Crystolyte Facility Management Pvt. Ltd., had filed its return. No steps have been taken by the respondents to seek recovery of tax, if any, from the aforesaid M/s Crystolyte Facility management Pvt. Ltd. The mode and manner of recovery from the petitioner no.1 is absolutely contrary to law laid down by the Division Bench of this Court in the case of Suncraft Energy Private Limited & Anr. v. Assistant Commissioner, State Tax, Ballygunge Charge & Ors., reported in 2023 SCC OnLine Cal 2226. In the light of the above, it cannot be considered as an exceptional situation for the respondents to proceed against the petitioner no.1 nor there is any finding to that effect.
7. Mr. Kanodia, learned advocate representing the petitioners submits that the order under Section 73(9) of the said Act dated 30th March, 2024 is based on no evidence and is perverse, the same should be set aside. Pending hearing of this petition he prays for stay of the order impugned.
8. Mr. Chakraborty, learned advocate representing the respondents on the other hand submits that the petitioners have an efficacious alternative remedy in the form of an appeal. This Hon’ble Court, at this stage, without the petitioners exhausting their alternative remedy, should not entertain the writ petition.
9. Heard the learned advocates appearing for the respective parties and considered the materials on record. Having regard to the case made out by the petitioners I am of the view that the writ petition should be heard. Further considering the prima facie case made out by the petitioners there shall be a stay of the demand raised by the proper officer as is reflected in the order dated 30th March, 2024, subject to the petitioners’ depositing 10% of the disputed tax amount with the GST authorities. Such payment must be made within a period of seven days from date.
10. If such payment is made, the interim order passed here shall continue till the end of July, 2024 or until further order whichever is earlier.
11. Let this matter appear in the Combined Monthly List of July, 2024 and be taken up for consideration on 23rd July, 2024.
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