In this article, we examine the case of Tikona Infinet Private Limited Vs State of U.P. and Another, as adjudicated by the Allahabad High Court. The case centres around the legitimacy of certain adjustments made by the assessee, Tikona Infinet, due to the non-availability of a relevant form on the GST portal.
The court deliberated on Tikona Infinet’s adjustment of input tax credit (ITC) using Form GST-33 instead of the required GST ITC-02, a deviation the company justified due to the latter form’s unavailability on the GST portal. The ITC, amounting to Rs.3,13,68,9997/-, had been transferred from M/s Tikona Digital Network Pvt. Ltd to Tikona Infinet during a business transfer.
The Allahabad High Court found that the company had made an illegal adjustment due to the lack of GST ITC-02 on the portal and stated that an excuse of a working capital shortage cannot bypass the legal procedure. However, the Court also noted that the GST portal was not online during the relevant period and thus set aside the order dated 17.04.2023, granting liberty to the respondent to pass a fresh order after considering the objections of the petitioner.
The Allahabad High Court’s ruling in the Tikona Infinet Vs State of U.P. case provides an interesting examination of the challenges faced due to non-availability of certain forms on the GST portal and the legal implications of businesses making adjustments to bypass procedure. The Court’s decision underscores the importance of adhering to the legal process, but also highlights the need for technical infrastructures like the GST portal to be reliably operational to enable compliance.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Sri Nishant Mishra, learned counsel for the petitioner and Sri Ankur Agarwal, learned counsel for the Revenue.
The writ petition has been filed questioning the legality, propriety and correctness of the order dated 17.04.2023 passed by the Deputy Commissioner, State Tax, Respondent No.2, whereby and whereunder the demand and recovery of input tax credit (ITC) for Rs.3,13,68,9997/- availed by the petitioner during the period September, 2017 to November, 2017 has been confirmed on the ground that the transfer of the said ITC has been accepted and availed by the petitioner through Form GST-33 instead of GST ITC-02.
The petitioner is a registered Company engaged in providing internet service across India from various State including the State of U.P. The petitioner entered into a Business Transfer Agreement on 17.08.2017 with another Company i.e. M/s Tikona Digital Network Pvt. Ltd. underwhich the business was transferred to the petitioner. M/s Tikona Digital Network (TDA) had accumulated ITS balance of more than Rs.3,1313,68,997/- which was unutilized. The petitioner being entitled to transfer the ITC remaining unutilised under Section 18(3) of the GST Act made attempt to transfer the same as per the procedure prescribed under Rule 41 of the CGST Rules, 2017. The Rules provide that the Transferor shall file GST ITC-02 electronically on common portal along with a request for transfer of ITC remaining unutilized in his Electronic Credit Ledger (ECL) to the tranferee. It is the case of the petitioner that functionality for filing Form IT-02 was not available on the common portal.
The non availability was communicated to the jurisdictional Assessing Authority. No response was received. Faced with serious working capital issues, the petitioner manually accepted and availed the ITC of Rs.3,13,68,997/-. After a lapse of five years, the petitioner was served with a show cause notice dated 28.2.2023 requiring the petitioner to serve the differential ITC of Rs.2,88,35,905.60/- along with interest and penalty. The total ITC available in Form GSTR-2A is Rs.2,22,24,921.08/- whereas petitioner availed the ITC of Rs.5,10,60,826.68/-. The petitioner submitted a detailed reply against the show cause with a prayer to withdraw the show cause notice. It is alleged that the Respondent No. 2 without considering the reply of the petitioner has proceeded to pass the impugned order dated 17.04.2023 confirming the demand.
We have heard learned counsel for the petitioner and have gone through the reply dated 13.03.2023 submitted by the petitioner to the show cause as also the impugned order dated 17.04.2023 passed by the Respondent No.2. Prima-facie, we find that the objections filed by the petitioner has not been considered by the respondent No. 2 and the order has been passed on technicalities.
Shri Ankur Agarwal, learned counsel appearing for the Respondent No.2 has vehemently argued in support of the impugned order. He submits that the averment of the petitioner to the effect that the objections have not been considered is ill founded inasmuch as the impugned order records that the objections have been filed and despite opportunity having been afforded to the petitioner for personal hearing, the same was not availed by the petitioner. No irregularity or illegality can be attributable to the impugned order and the same is liable to be sustained.
Be that as it may, we find that the petitioner has been non suited on the ground that Form ITC-02 for transfer of input tax credit was not available on the GST Portal which was in nascent stage during the initial months after its implementation on 01.07.2017 and it was incumbent upon the petitioner to have raised a proper grievance on the GST portal help-desk and ought to have waited for the relevant Form to go live on the GST portal instead of making illegal adjustment by use of the Form GSTR-3B of the transferor and the transferee company and mere shortage of working capital cannot be an excuse to bypass the legal procedure laid down under the law.
We are of the view that the stand of the Respondent No.2, for rejecting the claim of the petitioner in the wake of the admitted fact that the GST common portal was not online cannot be justified. We consequently set side the order dated 17.04.2023 with liberty to the Respondent No.2 to pass fresh order taking into consideration the objections of the petitioner and also affording it opportunity of hearing, strictly in accordance with law.
The writ petition is accordingly disposed of.
Needless to say the petitioner to cooperate in the proceedings and not take unnecessary adjournments.
Order Date :- 25.7.2023