Fake Firms & ITC Claims: HC Directs petitioner to avail alternative remedy

N.H. Lubricants Vs State Of Rajasthan (Rajasthan High Court)

Transactions with fake firms to fraudulently claim ITC: HC directs petitioner to avail alternative remedy

In the case of N.H. Lubricants vs State of Rajasthan, the Rajasthan High Court addressed issues related to fraudulent transactions involving fake firms and input tax credit (ITC) claims. The court’s decision focuses on the procedural and jurisdictional aspects of the case, emphasizing the need for the petitioner to pursue alternative remedies.

Case Summary

1. Background and Petition: The petitioner filed a writ petition seeking extraordinary jurisdiction of the High Court, arguing that their case was not properly considered. The petitioner claimed that the supplier had not paid tax and that the authorities should first recover the dues from the supplier before taking action against the buyer. This argument was based on previous cases where similar issues were entertained despite the availability of alternative remedies.
2. Respondents’ Argument: The respondents argued that the cases cited by the petitioner were factually different. In the present case, the reversal of ITC was based on the finding that transactions were with a bogus or fake firm. The respondents emphasized that the court should consider the factual premise rather than jurisdictional issues or natural justice principles.
3. Court’s Findings: The High Court found that the petition primarily raised factual disputes rather than jurisdictional issues. It was determined that the matter did not involve violations of natural justice principles and was distinguishable from the cited cases. The court noted that the petitioner’s issue was with the factual determination of the supplier being a fake firm.
4. Court’s Decision: The petition was dismissed. However, the court allowed the petitioner to pursue alternative remedies. It was also directed that if the petitioner filed an appeal within three months, the Appellate Authority should consider the appeal on its merits without addressing the limitation issue.

Conclusion

The Rajasthan High Court’s decision in the N.H. Lubricants case underscores the importance of addressing procedural and factual issues through appropriate channels. The court’s directive to seek alternative remedies reflects a standard approach to handling disputes involving factual determinations and compliance with tax regulations.

FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT

1. Heard.

2. Despite existence of an alternative remedy available to the petitioner, the petitioner has filed this writ petition seeking to invoke extraordinary jurisdiction of this Court on the submission that there is no proper consideration of the reply of the petitioner. Learned counsel for the petitioner would ground that the supplier has not paid tax, the press release requires the Authorities to first take recourse to the mechanism for recovery from the supplier/seller and it is only when an exceptional circumstance exists where the dealer is missing or there is closer of business by supplier or supplier not having adequate assets etc, the buyer could be proceeded against. He would submit that this issue has already been raised before this Court in D.B. Civil Writ Petition No. 19636/2023, M/s Apar Fragrances versus Union of India where the writ petition on this issue has been entertained despite existence of an alternative remedy. Leaned counsel would further submit that this issue has also been dealt with by the Calcutta High Court and orders have been passed, which case has also been referred to by this Court in M/s Apar Fragrances versus Union of India (Supra) and petition has been entertained.

3. Per-contra, learned counsel for the respondents would submit that both the aforesaid cases are distinguishable on facts. It is submitted that present is a case where the reversal of input tax credit has taken place under the impugned order on factual premise that the transactions shown are with a bogus/fake firm only to seek input tax credit. Learned counsel for the respondents have taken the Court to the order impugned as also the report of the investigation wing.

4. We find that present is not a case where the Authorities have proceeded on assumption and admission of factual premise that though there exist seller/supplier, input tax credit has been wrongly availed by the buyer or the seller so as to first take action against the supplier/seller before buyer is proceeded against.

5. Without commenting upon the sufficiency of the material on record with regard to the alleged supplier firm being a fake/bogus firm not in existence, suffice it to say that this petition raises a factual dispute and has nothing to do with any jurisdictional issue, much less violation of principles of natural justice. Therefore, this case is distinguishable from the cases, which have been cited at the bar to seek intelligence of this Court.

6. Accordingly, this petition is dismissed with liberty to the petitioner to avail alternative remedy.

7. Considering the submission that the petition was filed before expiry of the period of limitation, it is directed that if the appeal is filed within a period of three months from today, the Appellate Authority shall decide the appeal on its own merit without going into the question of limitation.