Case Law Details
Meenakshi Collections Vs Assistant Commissioner (ST) (Madras High Court)
Material Facts
The petitioner challenged an order dated 12.08.2024 confirming a demand for wrongful availment of Input Tax Credit (ITC), along with a 100% penalty under Section 74 and interest at 18% under Section 50 of the GST enactments. The dispute related to Assessment Year 2017-18. The impugned order was passed pursuant to a show cause notice in DRC-01 dated 20.06.2023 issued under Section 74, which had been preceded by an intimation in DRC-01A dated 25.03.2023.
The petitioner submitted that the tax amount had been paid on 22.07.2024 but sought waiver of interest and penalty and requested that the matter be remitted for fresh consideration on merits.
Procedural History
The proceedings commenced with DRC-01A dated 25.03.2023, followed by a DRC-01 show cause notice dated 20.06.2023 under Section 74. Thereafter, the respondent passed the impugned order dated 12.08.2024 confirming the tax demand together with interest and penalty, which was challenged before the High Court.
Legal Issues
- Whether the petitioner was liable to interest under Section 50 and penalty under Section 74 where ITC had been availed on invoices that were not reflected in Form GSTR-2A.
- Whether the matter required reconsideration in light of Circular No. 183/15/2022-GST dated 27.12.2022 regarding GSTR-2A discrepancies during the initial years of GST implementation.
Relevant Statutory Provisions
- Section 16 of the GST enactments
- Section 41
- Section 50
- Section 74
- Circular No. 183/15/2022-GST dated 27.12.2022
- Notification No. 79/2020 dated 15.10.2020
Petitioner’s Submissions
The petitioner submitted that:
- Tax had already been paid on 22.07.2024.
- Waiver of interest under Section 50 and penalty under Section 74 should be granted.
- The matter should be remitted for fresh adjudication on merits.
- ITC had been availed on the basis of invoices under self-assessment in terms of Section 41.
- The petitioner could not obtain certificates from suppliers as contemplated under Circular No. 183/15/2022-GST.
- Form GSTR-2A information was unavailable during the relevant period as GSTR-2A was notified only on 15.10.2020 by Notification No. 79/2020, and therefore the ITC was availed bona fide.
Observations
The Court noted that the facts were not in dispute and that the petitioner admitted availing ITC on supplies that were not reflected in Form GSTR-2A.
The Court further observed that there were overwhelming materials indicating technical glitches in the implementation of GSTR-2A. It noted that these glitches had been acknowledged by the Central Board of Indirect Taxes and Customs in Circular No. 183/15/2022-GST dated 27.12.2022. The circular recorded that Form GSTR-2A was not available on the common portal during the initial stages of GST implementation and that restrictions under Rule 36(4) came into effect only from 09.10.2019, while ITC continued to be governed by the conditions under Section 16 from 01.07.2017.
Findings
The Court held that if the ITC had been availed on supplies effected to the petitioner in accordance with Section 16, the petitioner should not be saddled with interest and penalty under Section 74. However, the Court held that this issue required detailed consideration in accordance with Circular No. 183/15/2022-GST.
Directions
The Court remitted the matter to the respondent for passing a fresh order on merits after considering the evidence and providing the petitioner an opportunity of hearing within three months from the date of receipt of the order.
The Court further directed that:
- If the petitioner is found entitled to the ITC, neither interest nor penalty would be justifiable.
- If the petitioner is unable to substantiate actual receipt of the supplies or has not paid the supplier after receipt of the supplies, the amount already paid shall stand appropriated, and the petitioner shall also pay interest and penalty.
Final Decision
The High Court quashed the impugned order dated 12.08.2024, remitted the matter to the respondent for fresh adjudication on merits in accordance with the above directions, disposed of the writ petition, made no order as to costs, and closed the connected miscellaneous petitions.
Input tax credit cannot be denied for GSTR-2A mismatches caused by technical portal glitches
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this writ petition, the petitioner has challenged the impugned order dated 12.08.2024 passed by the respondent, whereby a demand for the wrong availment of ITC has been confirmed, along with a 100% penalty under Section 74 and interest at 18% under Section 50 of the respective GST enactments.
2. The dispute pertains to the Assessment Year 2017-18 after the defect was pointed out regarding the wrongful availment of Input Tax Credit by the petitioner.
3. In this case, the impugned order has been passed pursuant to a show cause notice (DRC-01) issued under Section 74 on 20.06.2023 for the tax period 2017-2018.
4. The aforesaid notice in DRC-01 dated 20.06.2023 was preceded by an intimation in DRC-01A dated 25.03.2023.
5. The learned counsel for the petitioner would submit that the petitioner has now paid the tax on 22.07.2024. However, the petitioner seeks waiver from payment of penalty and interest under Section 74 and 50 of the respective GST enactments. It is further submitted that the matter may be remitted back to the respondent, so that the case can be decided on merits afresh.
6. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Government Advocate for the respondent.
7. The Input Tax Credit was availed based on the invoices raised on the petitioner on the basis of Self-Assessment under Section 41. The petitioner was, however, unable to obtain certificate from the suppliers in accordance with the guidelines stipulated in Circular No.183/15/2022-GST dated 27.12.2022.
8. The case of the petitioner is that information was not available in Form GSTR-2A, as it was notified only on 15.10.2020 vide Notification No.79/2020 and therefore, the credit that was availed by the petitioner was bonafide.
9. The facts of the case are not in dispute. In fact, the petitioner has admitted that they have availed input tax credit on the supplies effected by the supplier, which were not reflected in Form GSTR-2A.
10. There are overwhelming materials available to infer that there were certain technical glitches in the implementation of the GSTR-2A, which has been acknowledged by the Central Board of Indirect Taxes and Customs in Circular No. 183/15/2022-GST dated 27.12.2022. The relevant portions of the said circular are reproduced below:
“2. It is mentioned that FORM GSTR-2A could not be made available to the taxpayers on the common portal during the initial stages of implementation of GST. Further, restrictions regarding availment of ITC by the registered persons upto certain specified limit beyond the ITC available as per FORM GSTR-2A were provided under rule 36(4) of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules, only with effect from 9th October 2019. However, the availability of ITC was subjected to restrictions and conditions specified in Section 16 of CGST Act from 1St July, 2017 itself. In view of this, various representations have been received from the trade as well as the tax authorities, seeking clarification regarding the manner of dealing with such discrepancies between the amount of ITC availed by the registered persons in their FORM GSTR-3B and the amount as available in their FORM GSTR-2A during FY 2017-18 and FY 2018-19.”
11. If indeed Input Tax Credit was availed on the supplies effected to the petitioner in accordance with Section 16 of the respective GST enactments, the petitioner should not be saddled with interest and penalty under Section 74. However, this would require a detailed consideration in terms of the above circular.
12. Considering the same, the case is remitted back to the respondent to pass a fresh order on merits, after considering the evidence and affording the petitioner an opportunity of being heard, within a period of three months from the date of receipt of a copy of this order.
13. If the petitioner is indeed entitled to the input tax credit, neither interest nor penalty shall be justifiable. However, in case the petitioner has no records to substantiate the actual receipt, or if after receipt they have not paid the supplier for the supplies effected, the amount paid by the petitioner shall stand appropriated, and the petitioner shall also pay interest and penalty.
14. In view thereof, the impugned order is quashed, and this writ petition stands disposed of with the above directions. No costs. Connected miscellaneous petitions are closed.
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