Orissa HC Stays SCN-Based Order Alleging Wrongful ITC Availment

Coastal Construction Vs Chief Commissioner of CT and GST (Orissa High Court)

Orissa High Court heard a petition by Coastal Construction challenging a show cause notice (SCN) issued under Section 73 of the Odisha Goods and Services Tax (GST) Act, 2017. The SCN, dated August 8, 2023, alleged that the petitioner wrongfully availed Input Tax Credit (ITC) of ₹37,02,723 and required its reversal with interest. The petitioner’s counsel argued that the SCN contained an error by adding clause (e) to Section 16(2), which does not exist in the provision. Additionally, the disputed ITC was derived from the company’s balance sheet, and the petitioner explained that a portion of the amount pertained to exempted supplies (diesel and unregistered suppliers), while ₹30,38,928 was related to taxable supplies. The adjudication process led to an impugned order dated December 12, 2023, which the petitioner sought to quash for an opportunity of re-evaluation.

The revenue department, represented by its counsel, maintained that the petitioner had not reversed the sundry creditors’ amount of ₹2,05,70,686 within 180 days, justifying the ITC demand along with interest. The department also contended that the petitioner had lost its right to appeal, making the current petition unsustainable. However, the High Court noted that the inclusion of clause (e) in the SCN and order was a typographical error. While the court did not immediately rule on the validity of the tax demand, it emphasized the need for a clear finding on whether the petitioner had actually availed the disputed ITC. Consequently, the court stayed the impugned order and scheduled the next hearing for January 21, 2025.

1. Mr. Kar, learned senior advocate appears on behalf of petitioner and submits, his client has challenged, inter alia, show cause notice dated 8^th August, 2023 issued under section 73 of Odisha Goods and Services Tax Act, 2017 in respect of tax period 2017-18 (1^st July, 2017 to 31^st March, 2018). He demonstrates from quote of provision in section 16(2) in the notice that there is error. Two provisos follow clause (d) but the authority has added clause (e) and relied upon it to allege, Input Tax Credit (ITC) amount ₹37,02,723/- i.e. 18% of ₹2,05,70,686/- (sundry creditors) needs to be reversed with interest. He submits, the errors are apparent. The show cause notice (SCN) culminated in also impugned order dated 12^th December, 2023. Impugned order be set aside and quashed for his client to have further opportunity of hearing in the restored adjudication.

2. The SCN does say ITC amounting to ₹37,02,723/- needs to be reversed with interest and the allegations stand confirmed by impugned Prima facie, it appears that the authority has attributed ITC to petitioner (dealer). On query made Mr. Kar submits, the figure has been taken from his client’s balance sheet. He points out, his client had given explanation that a part of it related to exempted supply of goods (diesel), most part on exempted of supply of services (received from unregistered suppliers) and balance amount of ₹30,38,928/- is the taxable supplies received.

3. We have before us two figures. They are, allegation by revenue that ITC amounting to ₹37,02,723/- was wrongfully availed. We have explanation of petitioner that balance amount of ₹30,38,928/- is the taxable supplies received. That leaves a difference of ₹6,63,795/-.

4. Mr. Mishra, learned advocate, Standing Counsel appears on behalf of revenue. He submits, no interference is warranted with impugned order. Sundry creditor amount of ₹2,05,70,686/- was not reversed within 180 days, which is why 18% of it was noticed to be demand of tax with interest thereon. Accordingly there was adjudication. Furthermore, the order is appealable. Petitioner has lost its right of appeal and therefore the petition, which is not maintainable.

5. We are satisfied that inserting clause (e) in the provision reproduced in the SCN and impugned order are typographical errors. The two provisos are clearly there. However, we need satisfaction that there was finding, of petitioner having had claimed and availed the Revenue to issue instructions.

6. List on 21^st January, 2025. Impugned order will remain stayed till next date of hearing.