Case Law Details
Hindustan Unilever Limited Vs Union of India (Rajasthan High Court)
In a recent development, the Rajasthan High Court has taken notice of a significant issue involving Hindustan Unilever Limited and the Union of India. The matter pertains to the absence of a proper mechanism for matching the credit notes issued by suppliers with the Input Tax Credit (ITC) reversal undertaken by the recipient. This article delves into the details of the case and the implications of this challenge.
1. Background: The petitioner, Hindustan Unilever Limited, has raised a concern regarding the lack of an effective mechanism to match supplier credit notes with the reversal of ITC by the recipient. Previously, Section 43 of the Central Goods and Services Tax (CGST) Act and Rajasthan Goods and Services Tax (RGST) Act mandated such matching exercises by the tax department. However, this provision has since been omitted.
2. Petitioner’s Argument: The petitioner contends that it is not feasible for them to obtain certificates from recipients as proof of ITC reversal to claim a reduction in tax liability. Instead, they argue that the responsibility of matching should lie with the tax department, and the eligibility for tax liability reduction should not be contingent on producing certificates or evidence of ITC reversal.
3. Challenging Workability: The challenge to the validity of this provision primarily centers around its workability. Currently, there is no statutory obligation on the tax authorities to conduct matching exercises. If a petitioner wishes to claim a reduction in tax liability, they must provide evidence of reversal by the recipient. In this case, the petitioner challenges the provision mainly due to difficulties in collecting such certificates or proof from recipients. They acknowledge that they have managed to collect such evidence in some instances.
4. Court’s Direction: While the court has not issued an interim order, it has directed the counsel for the Union of India to propose an appropriate mechanism to address this issue. The matter is scheduled for further consideration on October 5, 2023.
5. Conclusion: The Rajasthan High Court’s involvement in the case of Hindustan Unilever Limited vs. Union of India underscores the need for a practical mechanism to match supplier credit notes with ITC reversals. This issue has significant implications for businesses and tax compliance. The court’s direction to seek a solution from authorities reflects the ongoing challenges in tax administration and the pursuit of workable solutions in the evolving landscape of tax laws and regulations.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
Heard.
Learned counsel for Union on India Shri Devesh Yadav under instructions of learned ASG takes notice on behalf of respondent Nos.1 & 4.
Learned Additional Advocate General Shri R.P. Singh assisted by Mr. Jaivardhan Singh Shekhawat takes notice on behalf of respondent Nos.2 & 3.
The petitioner raises an issue with regard to absence of proper mechanism of matching of credit note of supplier with the ITC reversal by the recipient. It appears that earlier there was a provision under Section 43 of the CGST Act / RGST Act obligating the matching exercises to be undertaken by the department. That provision later on has been omitted.
Learned counsel for the petitioner would submit that it is not practically possible for the petitioner to submit certificate after obtaining the same from the recipient as proof of reversal of credit by the recipient, in order to avail reduction of tax liability. Instead it is for the department to undertake the matching exercise and the claim of reduction in tax liability should not be made dependent upon production of any certificate or proof of reversal of ITC by the recipient.
We find that the validity of the provision is being challenged more on the ground of workability. For the present we find that in the absence of their being any statutory obligation cast on the respondent to undertake matching exercise, if the petitioner is willing to claim reduction in tax liability, proof of reversal by the recipient is to be provided by the supplier. In the present case, the petitioner has challenged the validity of the provision more on the grounds of difficulty in collecting such certificate / proof from the recipient. Even according to the petitioner he has been able to collect such certificate / proof in some cases.
This matter is required to be considered on the next date of hearing.
Though we are not granting any interim order at this stage, learned counsel for Union of India is directed to place before the Court appropriate suggested mechanism.
List the matter on 05.10.2023.
