ITC cannot be denied when FORM GSTR-2 was not notified

Introduction: 

The Madras High Court, in the case of Tvl. Kavin HP Gas Gramin Vitrak v. The Commissioner of Commercial Taxes & Ors. [W.M.P. (MD) Nos. 6764 and 6765 of 2023 dated November 24, 2023], has addressed the predicament faced by dealers in claiming Input Tax Credit (ITC) through physical filing of GSTR-3B when GSTR-2 was not notified. The court’s decision emphasizes practical difficulties arising from GSTN network limitations and calls for a solution to enable manual returns. Hon’ble Madras High Court held that the Respondents without giving any opportunity to file the returns by notifying the Form GSTR-2, cannot expect the taxable person to file returns. Hence, the Respondents ought to allow the dealers to file returns manually and the writ petitions were allowed without any cost.

Facts:

Tvl. Kavin HP Gas Gramin Vitrak (“the Petitioner”) is engaged in business related to petroleum gases and other gaseous hydrocarbons. The Revenue Department (“the Respondent”) issued the Show Cause Notice (“Impugned Notice”) dated April 27, 2022, based on the scrutiny and verification of the FORM GSTR-3B which was filed in the Financial Year (“F.Y.”) 2017-18 and 2018-19 to show cause the reason of claiming belated Input Tax Credit (“ITC”). The Respondent was directed to remit and reverse the wrong claim of ITC on the purchase of petroleum products.

The Petitioner submitted that the FORM GSTR-3B were filed physically and contended that the sales made, and tax collected were duly reported by the supplier in GSTR-1. However, the Petitioner could not claim the ITC because FORM GSTR-2 was not notified. Also, the GST Portal did not permit the filling of FORM GSTR 3B online when the dealers did not pay tax on outward supply/sales, due to which ITC could not be claimed online. Therefore, the Petitioner accounted the purchases and credited the payment made through the tax invoice, claimed ITC in books of accounts and availed the ITC through FORM GSTR-3B which was filed physically.

Further, the Respondent passed a non-speaking order dated August 16, 2022 (“the Impugned Order”) without considering the contentions of the Petitioner.

Hence, aggrieved by the Impugned Order the present writ petition was filed before the Hon’ble Madras High Court.

Issue:

Whether ITC can be claimed by submitting the physical FORM GSTR-3B returns when FORM GSTR-2 was not notified?

Held:

The Hon’ble Madras High Court in the case of W.M.P. (MD) Nos. 6764 and 6765 of 2023 held as under:

• Observe that, if the GSTN provided an option for filing GSTN without payment of tax or incomplete FORM GSTR-3B, the dealer would be eligible for claiming of ITC. The same was not provided in GSTN network hence, the dealers are restricted to claim ITC on the ground of non-filing of FORM GSTR-3B within prescribed time.
• Noted that, If the option of filing incomplete filing of FORM GSTR-3B is provided in the GSTN network the dealers would avail the claim and determine self-assessed ITC online. The Petitioner had expressed real practical difficulty. The GST Council may be the appropriate authority, but the Respondents ought to take steps to rectify the same. Until then the Respondents ought to allow the dealers to file returns manually.
• Relied on the judgment passed by Punjab and Haryana High Court in the case of Hans Raj Sons v. Union of India and others [CWP No. 36393 of 2019 dated December 16, 2019], and Adfert Technologies Private Limited v. Union of India and others [CWP No. 30949 of 2018 dated November 04, 2019], wherein the Hon’ble Court held that the in absence of any enabling mechanism the assessee should not be denied from availing credit.
• Held that, the Respondents shall permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply/sales without paying taxes. And directed the respondents to accept the belated returns and if the returns are otherwise in order and in accordance with law, the claim of ITC may be allowed. Hence, the Impugned Orders is quashed and the writ petition is allowed.

Conclusion: The Madras High Court’s decision acknowledges the practical challenges faced by dealers in the absence of notified GSTR-2. By advocating for manual returns and urging authorities to rectify GSTN limitations, the court emphasizes the need for a flexible approach to ensure legitimate ITC claims. This ruling contributes to the ongoing discourse on simplifying GST procedures for businesses navigating complex scenarios.

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