Dhanalakshmi Steels Vs Assistant Commissioner (st) (Madras High Court)
Conclusion: Any denial of ITC should clearly refer the applicable clause under Section 17(5) to allow the taxpayer a reasonable opportunity to contest the claim. The absence of such specification was deemed a violation of natural justice principles hence, the authorities were instructed to provide assessee with a fair opportunity to respond and submit relevant documents before issuing a fresh order.
Held: Assessee challenged the impugned notice while proposing to invoke Section 17(5) stated that the Input Tax Credit should not be available in respect of the list of commodities and services mentioned and did not set out the reasons nor the clauses under Section 17(5) which got attracted and results in denial of assessee’s claim of Input Tax. It was held that tax authorities must inform taxpayers of the exact provision being invoked before taking adverse action. The Court emphasized that any denial of ITC should clearly reference the applicable clause under Section 17(5) to allow the taxpayer a reasonable opportunity to contest the claim. The absence of such specification was deemed a violation of natural justice principles. The Court set aside the impugned order and directed the authorities to reissue a notice clearly mentioning the specific clause under which ITC was being denied. The authorities were also instructed to provide assessee with a fair opportunity to respond and submit relevant documents before issuing a fresh order. This ruling reinforces the requirement for transparency and procedural adherence in tax disputes.
