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2025 (5) TMI 259 - HC - GSTRefund claim obtained by different entity - petitioner firm registered under GST in two different states (U.P. and M.P.) constitutes the same legal entity or distinct persons for the purposes of GST law particularly under Section 25(4) of the CGST Act 2017 - HELD THAT - Whether M/s. Ashirwad Industries Ghaziabad and M/s. Ashirwad Industries Rewa are the same firm or different entity it is a matter of evidence but the same could not be produced by the petitioner firm in the absence of receipt of notices of the appeal preferred by Assistant Commissioner CGST and Central Excise Rewa Division Rewa before Joint Commissioner (Appeals) CGST and Central Excise Bhopal. Admittedly no notice was issued to M/s. Ashirwad Industries Ghaziabad and no acknowledgement of the notice has been brought on record by the respondent in the present petition to demonstrate that the notices of appeal were duly served upon the petitioner firm. The appeal was decided ex-parte. Notice of the appeal was also not uploaded on the portal of M/s. Ashirwad Industries Ghaziabad. Even in the order dated 31.01.2023 it is not mentioned as to how the opportunity of personal hearing was provided to the petitioner firm through virtual/ physical mode. It is nowhere mentioned in the order that any notice was issued and the same was duly served to the petitioner firm or any authorized person. It is deemed just and proper to grant an opportunity to the petitioner firm to defend the Appeal No.34-GST/2022 preferred by Assistant Commissioner CGST and Central Excise Rewa Division Rewa which was decided ex-parte as it is not satisfied that the notices of the appeal were properly served upon the petitioner firm. The order dated 31.0.2023 passed by Joint Commissioner (Appeals) CGST and Central Excise Bhopal and all consequent actions included show cause notice dated 29.08.2023 order in original dated 13.12.2023 and order to third party dated 04.07.2024 are set aside. Appeal No.34- GST/2022 is hereby restored to its original number. Petition allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legal Identity of the Petitioner Firm under Different GST Registrations Relevant Legal Framework and Precedents: Section 25(4) of the CGST Act, 2017 provides that a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory, shall be treated as distinct persons for the purposes of the Act. This provision implies that each GST registration number corresponds to a distinct person in the eyes of the law, even if the underlying business entity is the same. Court's Interpretation and Reasoning: The respondent department relied heavily on Section 25(4) to argue that the petitioner firm's U.P. and M.P. GST registrations represented two distinct persons. Consequently, the tax and penalty paid under the U.P. registration could not be refunded under the M.P. registration. The Court acknowledged this statutory provision but also noted that whether the two registrations represent the same firm or distinct entities is a matter of evidence, which was not conclusively established by the department. Key Evidence and Findings: The petitioner firm contended that the two GST registrations belonged to the same entity, as it was the same partnership firm operating in different states. However, the petitioner failed to produce documentary evidence to prove this identity conclusively, particularly in the context of the appeal proceedings before the Commissioner (Appeals). Application of Law to Facts: While Section 25(4) treats different registrations as distinct persons, the Court recognized that the underlying reality of the business entity might differ. The absence of clear evidence from the petitioner firm to establish the unity of the entity under both registrations left the issue unresolved, requiring further factual determination in appeal proceedings. Treatment of Competing Arguments: The petitioner emphasized the continuity of business and identity of the firm, whereas the department stressed the statutory distinction between registrations. The Court found merit in both arguments but underscored the necessity of proper evidence and procedural fairness. Conclusion: The Court did not conclusively determine the identity issue but held that it is a factual question to be decided after proper opportunity of hearing and evidence. Issue 2: Legality and Validity of Refund under Different GST Registration Relevant Legal Framework and Precedents: Section 54 of the CGST Act, 2017 governs refund of tax. Refund claims must be filed under the same registration number under which the tax was paid. The principle underlying this is to maintain consistency and prevent wrongful claims. Court's Interpretation and Reasoning: The refund of Rs. 2,24,118/- was granted to the petitioner firm under its M.P. GST registration, although the tax and penalty were originally paid under the U.P. registration. The Commissioner reviewed this refund and found it to be "not correct, legal and proper" because the refund was sanctioned to a different GSTIN than the one that paid the tax and penalty, violating Section 54. Key Evidence and Findings: The refund order dated 07.08.2021 was passed in favor of the M.P. GSTIN, and the department challenged this via a review and subsequent appeal, which was decided ex-parte against the petitioner firm. Application of Law to Facts: The Court acknowledged that the refund should be granted only to the entity under whose GST registration the tax was paid. The department's challenge was based on this legal principle. Treatment of Competing Arguments: The petitioner argued that the two registrations belonged to the same firm, and hence refund under the M.P. GSTIN was proper. The department argued that the refund was irregular as per law. The Court found that without proper evidence and hearing, the ex-parte decision against the petitioner was not justified. Conclusion: The Court set aside the ex-parte appellate order and directed re-hearing, emphasizing the need to determine the legal entitlement to refund after proper procedure. Issue 3: Compliance with Principles of Natural Justice and Service of Notices Relevant Legal Framework and Precedents: The principles of natural justice require that a party must be given adequate notice and opportunity to be heard before adverse orders are passed. Proper service of notice is essential for valid proceedings. Court's Interpretation and Reasoning: The petitioner firm contended that no notices were served upon it regarding the appeal filed by the Assistant Commissioner and the subsequent show cause notice demanding recovery. The appellate authority claimed multiple opportunities of personal hearing were provided, but the petitioner did not appear. Key Evidence and Findings: The Court observed that the department failed to produce any evidence of proper service of notices on the petitioner's registered address in U.P. or on the GST portal for the U.P. registration. The appeal was decided ex-parte without demonstrating that the petitioner had actual or constructive notice. Application of Law to Facts: The Court held that the failure to serve notice violated the principles of natural justice, rendering the ex-parte order and subsequent recovery proceedings invalid. Treatment of Competing Arguments: While the department claimed due process by issuing notices at the M.P. address and providing hearing opportunities, the petitioner's lack of knowledge and absence of notice service at the U.P. address was decisive. Conclusion: The Court set aside the ex-parte order and all subsequent orders, restoring the appeal for fresh adjudication after proper notice and hearing. Issue 4: Legality of Recovery and Penalty under Section 74(1) of the CGST Act, 2017 Relevant Legal Framework and Precedents: Section 74(1) pertains to cases of tax evasion involving fraud, willful misstatement, or suppression of facts, allowing for demand of tax, interest, and penalty up to 100% of tax. Court's Interpretation and Reasoning: The department issued a show cause notice and confirmed demand with penalty on the ground that the refund was erroneously allowed to the petitioner firm. The petitioner denied any fraud or suppression, asserting that the refund was legitimately claimed. Key Evidence and Findings: No evidence was produced to establish fraud or willful misstatement by the petitioner. The Court noted that the penalty and demand were based on procedural technicalities rather than substantive fraud. Application of Law to Facts: The Court implied that invoking Section 74(1) without proof of fraud or misstatement was improper, especially when the petitioner had a valid refund claim under the earlier appellate order. Treatment of Competing Arguments: The department relied on procedural irregularities to justify penalty; the petitioner argued absence of malafide intent or fraud. Conclusion: The Court did not uphold the penalty demand and stayed all recovery proceedings pending fresh adjudication. 3. SIGNIFICANT HOLDINGS The Court held:
The Court set aside the order dated 31.01.2023 by the Commissioner (Appeals), all subsequent show cause notices, original orders, and third-party recovery orders. The appeal was restored for fresh adjudication after proper notice and hearing to the petitioner firm. The petitioner was directed to appear before the appellate authority on a specified date.
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