Case Law Details
Hanuman Industrial Corporation Vs Govt of NCT of Delhi (Delhi High Court)
The petitioner challenged an order dated 20.04.2024 passed by the Adjudicating Authority under Section 73 of the Central Goods and Services Tax Act, 2017 and the Delhi Goods and Services Tax Act, 2017, confirming a demand of ₹46,27,512 on account of alleged excess utilisation of input tax credit (ITC), along with interest and penalty. The order was issued pursuant to a show cause notice dated 24.12.2023.
The show cause notice alleged that the petitioner had availed ITC from suppliers who had not paid tax on their outward supplies, invoking Section 16(2)(c) of the CGST Act. It also referred to two taxpayers whose registrations had been cancelled retrospectively.
In response, the petitioner contended that it had received the supplies, paid the full consideration to the suppliers, and that the suppliers were duly registered at the relevant time. It was further submitted that the GST portal reflected that taxes had been paid on the supplies.
The Court noted that the impugned order did not consider the petitioner’s contentions and mechanically confirmed the demand on the ground that ITC had been availed from “cancelled dealers, return defaulters & tax non payers.” The order did not specify which suppliers had failed to pay taxes or file returns during the relevant period.
It was also observed that there was no finding in the impugned order that the suppliers had not discharged their tax liability to the Government, either in cash or through utilisation of admissible ITC, as required under Section 16(2)(c) of the CGST Act. The Court emphasized that, as per the statutory provision, ITC is admissible only where tax has actually been paid to the Government, but such non-payment must be established through specific findings.
During the hearing, counsel for the respondents submitted that the matter could be remanded to the Adjudicating Authority for fresh consideration. Accepting this submission, the Court set aside the impugned order.
The matter was remanded to the Adjudicating Authority with directions to decide it afresh after providing the petitioner an opportunity of hearing. The Authority was directed to complete the process as expeditiously as possible, preferably within eight weeks.
The petition was disposed of accordingly, and all pending applications were also disposed of.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Issue notice.
2. Learned counsel for the respondents accept notice.
3. The petitioner has filed the present petition impugning the order dated 20.04.2024 (hereafter the impugned order), passed by the Adjudicating Authority under Section 73 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) /the Delhi Goods and Services Tax Act, 2017 (hereafter the DGST Act), whereby an aggregate demand of ₹46,27,512/-was confirmed on account of excess utilisation of the Input Tax Credit (hereafter ITC) as well as interest and penalty.
4. The impugned order was passed pursuant to the Show Cause Notice dated 24.12.2023 (hereafter the SCN), whereby the petitioner was called upon to show cause as to why the proposed demand not be confirmed.
5. The SCN is the usual template followed by the assessing authorities in various cases. The SCN referred to Section 16(2)(c) of the CGST Act which stipulates that a person shall be entitled to avail the ITC on supply of goods and services, subject to the condition that the tax charged in respect of such supply has been paid to the Government. It is alleged that the petitioner has availed the ITC from suppliers who had not paid the tax on their outward supplies. The SCN also mentioned the names of two tax payers whose registrations were cancelled with retrospective effect.
6. The petitioner had responded to the SCN stating that the petitioner had received the supplies from the suppliers in question and had paid the entire amount due to them. It was asserted that the said suppliers were duly registered with the GST authorities at the material time and the GST portal reflected that they had paid the taxes on the supplies.
7. The impugned order does not consider the said contention and has mechanically confirmed the liability on the ground that the petitioner had availed the ITC from “cancelled dealers, return defaulters & tax non payers” without specifying the dealers that had not paid taxes or had not filed returns at the material time.
8. There is no finding that the suppliers from whom the petitioner had availed supplies during the material time had not discharged their tax liability by depositing tax with the Government either in cash or by availing ITCs, as set out in Section 16(2)(c) of the CGST Act.
9. Section 16(1) and Section 16(2)(c) of the CGST Act are set out below:
“16. Eligibility and conditions for taking input tax credit.— (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––
(a)…
(b)…
(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and
(d)….”
10. As apparent from the plain language of Section 16(2)(c) of the CGST Act, the ITC would be available only in respect of such supplies where the tax is actually being paid to the government, either in cash or through utilisation of the ITC admissible in respect of the said supply. There is no specific finding in the impugned order that the suppliers, from whom the petitioner had availed supplies, have not paid the tax in respect of their outward supplies to the petitioner, either in cash or by utilisation of admissible liability.
11. Aggarwal, who appears for the respondents on advance notice submits that the matter be remanded to the Adjudicating Authority for consideration afresh.
12. In view of the said submission, we set aside the impugned order and remand the matter to the concerned Adjudicating Authority.
13. The Adjudicating Authority shall decide afresh after affording the petitioner an opportunity of hearing as expeditiously as possible, preferably within a period of eight weeks from date.
14. The present petition is disposed of in the aforesaid terms.
15. All pending applications are also disposed of.
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