Case Law Details
Rakkimuthu Ramesh Vs Asst. Commissioner of State Tax (Kerala High Court)
The Kerala High Court held that no willful tax evasion could be alleged where a supplier reported a sale in March while the purchaser claimed input tax credit (ITC) in April returns due to receipt of goods in the subsequent financial year. The petitioner, a registered taxpayer engaged in the business of plastic, purchased goods on 30.03.2018 and 31.03.2018 from an out-of-State supplier. Although the purchases were effected in March 2018, the goods were received only in April 2018, falling within the financial year 2018–19. Accordingly, the petitioner included the transactions in the April 2018 return and claimed ITC.
The supplier, however, reported the transaction in its March 2018 return and paid tax. On account of this timing mismatch, a notice in ASMT-10 was issued in 2022, followed by a show cause notice proposing proceedings under Section 73(1) of the Kerala State Goods and Services Tax Act, 2017. According to the petitioner, the show cause notice was uploaded under the “additional notices” tab on the GST portal and therefore did not come to his attention. As a result, the proceedings were finalised ex parte, leading to an adverse assessment order and consequential demand.
Before the Court, the petitioner contended that denial of ITC was unsustainable since the transactions were correctly reported based on the date of receipt of goods and that there was no intention to evade tax. It was argued that the issue required only reconciliation and that, if given an opportunity, the petitioner could produce original invoices and supporting documents. The State opposed the petition, submitting that multiple opportunities had been granted, that the petitioner failed to produce original invoices as required, and that no reply was filed to the show cause notice.
After examining the records, the Court found that the dispute arose solely due to the transition between two financial years and not from any willful attempt to evade tax. It noted that while invoices were raised at the end of the financial year 2017–18, the goods were received in April 2018 and were therefore rightly reported in the April return. The Court observed that the matter essentially required reconciliation of transactions. It also took note of the petitioner’s explanation that the show cause notice was not noticed due to its placement under the “additional notices” tab on the portal.
Considering the facts and circumstances, the Court held that a lenient approach was warranted. It quashed the assessment order and directed the assessing authority to reconsider the matter after granting the petitioner an opportunity to produce the necessary records, including original invoices, and after affording a personal hearing. The reconsideration was directed to be completed within three months from receipt of the judgment.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner is a registered tax payer under the provisions of CGST and KGST Act and is engaged in the business of plastic. The dispute, which is the subject matter in this writ petition, pertains to the assessment in year 2018-19. The transactions which are relevant for considering the issue involved in this case were the purchases affected by the petitioner on 30.03.2018 and 31.03.2018 from an agency outside the State. Even though the petitioner affected the purchases on the dates referred to above, the goods as per the said purchase reached the petitioner, during the month of April 2018, which falls within the financial year 2018-19. Therefore, the petitioner had included the said transaction in the monthly returns submitted for April 2018, and input tax credit was also claimed.
2. However, the supplier included the said transaction in the return submitted in March 2018 and tax was paid. In such circumstances, a notice was issued to the petitioner in ASMT-10, in the year 2022, to which the petitioner submitted a reply. Thereafter, Ext.P1 Show Cause Notice to the petitioner was issued, proposing to initiate proceedings under Sec.73(1) of the Kerala State Goods and Services Tax Act – 2017 of 26.12.2023.
3. According to the petitioner, the said show cause notice was uploaded under the tab for “additional notices,” in the web portal and consequently, the issuance of such notice did not come to the petitioner’s attention. Accordingly, the proceedings initiated as per Ext.P1 were finalised by Ext.P2 order and Ext.P3 is the demand issued based on Ext.P2. This writ petition is submitted in such circumstances, challenging Exts.P2 and P3.
4. I have heard Sri. Muraleedharan R., the learned counsel appearing for the petitioner and Sri. Arun Ajay Shankar, the learned Government Pleader for the respondents.
5. The main contention raised by the petitioner is that, the denial of input tax credit pertaining to the transactions referred to above, is not legally sustainable, as the petitioner correctly included the said transaction in the returns furnished by the petitioner during the month of April 2018, as the said goods were received by him only in the said month. Therefore, there was no willful attempt for evasion of any tax and what is required is a re-adjustment of tax, by way of reconciliation. The learned counsel for the petitioner also submits that, if an opportunity is granted, the petitioner can produce all the documents, including the original invoices, which were sought for in Ext.P1, so as to clarify this aspect and to get the assessments reconciled.
6. On the other hand, the learned Government Pleader opposes the said application, by pointing out that, several opportunities were granted to the petitioner, but the petitioner failed to provide the necessary documents to substantiate his contentions. The learned Government Pleader brought to the attention of this Court, the contents of Ext.P1, which would indicate the issuance of prior notice of the same, requiring the petitioner to produce the original invoices. However, the petitioner failed to produce the said invoices and no reply was also submitted to Ext.P1 Show cause notice. Therefore, it was pointed out by the learned Government Pleader that, this is a case in which no interference is required at the instance of this Court under Article 226 of the Constitution of India and it is for the petitioner to work out his remedies available as per the statute.
7. I have carefully gone through the records and considered the contentions raised by both sides. On going through the materials placed before this Court, it is evident that, this is not a case where a willful attempt is made out, to evade the tax. The whole confusion arose on account of a transaction which occurred during the transition period between two financial years. It is also evident that, even though invoices were raised during the fag end of the financial year 2017-18, the goods were received by the petitioner during the commencement of the financial year 2018-19. Taking into account the date of receipt of the goods, the petitioner reported the said transaction by including in the same in the return submitted in the month of April 2018. Therefore, what was to be done, was only the reconciliation of the transactions. It is also discernible from Ext.P1 that, the petitioner was required to produce the original invoices, so as to verify the same and the proceedings were finalised because of the failure on the part of the petitioner in furnishing the same. In this regard, the case of the petitioner is that, since Ext.P1 was uploaded in the tab for additional notices, the petitioner was not aware of the same and on account of the same, he could not produce the said documents.
8. Of course it is true that, Ext.P1 refers to a previous notice which required the petitioner to furnish the original invoices before the authority concerned. However, even if that is treated as a lapse on the part of the petitioner, I am of the view that, in the light of the facts and circumstances of the case, a lenient view is warranted, since I have already found that, this is not a case in which a willful attempt to evade tax was made out. As observed above, this is only a case that necessitates readjustments of the amount by way of reconciliation. Therefore, I am of the view that an opportunity can be granted to the petitioner to produce the necessary records, including the original invoices, to substantiate his contention, before the original assessing authority.
In such circumstances, this writ petition is disposed of, quashing Ext.P2 with a direction to the 1st respondent to reconsider the matter, after giving the petitioner an opportunity to produce necessary records and after giving him an opportunity for being heard. This shall be done within a period of three months from the date of receipt of copy of this judgment.
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