2025 (7) TMI 459 - HC - GST

Rejection of appeal order - mismatch of Input Tax Credit in GSTR 1 and GSTR 3B and certain excess claim of ITC - time limitation - HELD THAT - Considering the submissions made it appears that the 1st respondent had dismissed the appeal at the threshold on the ground of limitation. According to the petitioner the petitioner filed the rectification application on 25.11.2024 itself and the 1st respondent rejected the same vide order dated 06.02.2025. Thereafter the petitioner immediately preferred an appeal on 07.03.2025 and the delay of 67 days has occurred since the petitioner was pursuing the rectification application. The reason assigned by the petitioner for the delay in filing the appeal against the assessment order appears to be genuine. Therefore this Court is inclined to condone the delay of 67 days in filing the appeal against the impugned assessment order. The delay of 67 days in filing the appeal against the impugned assessment order dated 28.08.2024 is hereby condoned - The 2nd respondent/Appellate Authority is directed to take the appeal on record without insisting upon the limitation aspect subject to the payment of 5% of the disputed tax demand as agreed by the petitioner in addition to 10% statutory pre-deposit i.e totally 15% of the disputed tax amount in respect of the impugned assessment period within a period of two weeks from the date of receipt of a copy of this order. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the delay of 67 days in filing the appeal against the impugned assessment order dated 28.08.2024 can be condoned on the grounds of pursuing a rectification application.
• Whether the appellate authority was justified in rejecting the appeal on the ground of limitation without considering the merits of the case.
• Whether the petitioner is entitled to have the appeal admitted subject to payment of a pre-deposit, and if so, the quantum of such pre-deposit.
• Whether the petitioner's bank account, which was frozen pursuant to the tax demand, should be directed to be unfrozen upon compliance with the pre-deposit conditions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay in Filing Appeal

Relevant Legal Framework and Precedents: The limitation period for filing an appeal against an assessment order is prescribed under the relevant tax statutes and rules. Courts have consistently held that delay caused due to genuine reasons such as pendency of rectification applications may be condoned if the appellant acts promptly after rejection of such applications. The principle of substantial justice governs the exercise of discretion to condone delay.

Court's Interpretation and Reasoning: The Court observed that the petitioner had filed a rectification application on 25.11.2024, which was rejected on 06.02.2025. The appeal was filed immediately thereafter on 07.03.2025, resulting in a delay of 67 days. The Court found this delay to be attributable to the petitioner's bona fide attempt to seek rectification before filing the appeal. Hence, the reason assigned for the delay was held to be genuine.

Application of Law to Facts: The Court applied the principle that delay caused by pursuing a rectification remedy can be excused, especially when the appeal is filed promptly after rejection. The petitioner's conduct was consistent with this principle, justifying condonation of the delay.

Treatment of Competing Arguments: The respondents did not dispute the genuineness of the petitioner's explanation but relied on the limitation bar to reject the appeal. The Court found the petitioner's explanation more persuasive and equitable.

Conclusion: The Court condoned the 67-day delay in filing the appeal.

Issue 2: Validity of Rejection of Appeal on Limitation Grounds

Relevant Legal Framework and Precedents: Appeals are required to be filed within a prescribed time limit. However, the appellate authority has discretion to condone delay if sufficient cause is shown. The rejection of appeal solely on limitation without consideration of merits or reasons for delay may be subject to judicial review.

Court's Interpretation and Reasoning: The Court noted that the 2nd respondent/Appellate Authority had rejected the appeal at the threshold on limitation grounds without considering the petitioner's explanation or the pendency of the rectification application. This was deemed to be a mechanical and rigid approach inconsistent with principles of equity and justice.

Application of Law to Facts: Since the petitioner had a genuine cause for delay, the appellate authority's rejection of the appeal without condonation of delay was not justified.

Treatment of Competing Arguments: The respondents' reliance on limitation was overridden by the Court's view that the delay was excusable.

Conclusion: The Court set aside the rejection order and directed the appellate authority to admit the appeal.

Issue 3: Conditions for Admission of Appeal and Pre-Deposit

Relevant Legal Framework and Precedents: Tax statutes often require a pre-deposit of a percentage of the disputed tax demand as a condition for admission of appeal. Courts have discretion to fix the quantum of pre-deposit, balancing the interest of revenue and the appellant.

Court's Interpretation and Reasoning: The Court directed that the appeal be admitted subject to the payment of 15% of the disputed tax demand, comprising the 10% statutory pre-deposit and an additional 5% as agreed by the petitioner. The Court's direction reflects a compromise ensuring protection of revenue while allowing the petitioner to pursue the appeal.

Application of Law to Facts: The petitioner agreed to the additional pre-deposit condition, and the Court imposed a timeline of two weeks for compliance.

Treatment of Competing Arguments: The respondents' consent to the Court's order facilitated this balanced direction.

Conclusion: The appeal shall be admitted on condition of payment of 15% of the disputed tax demand within two weeks.

Issue 4: Direction for Unfreezing Bank Account

Relevant Legal Framework and Precedents: Tax authorities may freeze bank accounts to secure tax demands. Courts have held that such coercive measures should be lifted once the appellant complies with pre-deposit conditions.

Court's Interpretation and Reasoning: The Court ordered that upon proof of payment of the pre-deposit, the respondents shall issue directions to the petitioner's banker to unfreeze the bank account forthwith, thus protecting the petitioner's business interests.

Application of Law to Facts: The petitioner's compliance with pre-deposit conditions triggers the lifting of the freeze.

Treatment of Competing Arguments: The respondents agreed to comply with the Court's directions.

Conclusion: The petitioner's bank account shall be unfrozen upon payment of the pre-deposit.

3. SIGNIFICANT HOLDINGS

The Court held:

"The reason assigned by the petitioner for the delay in filing the appeal against the assessment order, appears to be genuine. Therefore, this Court is inclined to condone the delay of 67 days in filing the appeal against the impugned assessment order."

"The 2nd respondent/Appellate Authority is directed to take the appeal on record without insisting upon the limitation aspect, subject to the payment of 5% of the disputed tax demand as agreed by the petitioner in addition to 10% statutory pre-deposit, i.e totally 15% of the disputed tax amount in respect of the impugned assessment period, within a period of two weeks from the date of receipt of a copy of this order."

"Upon production of proof with regard to the payment of 15% of the disputed tax made by the petitioner, the respondents- Department is directed to issue appropriate direction on the petitioner's banker towards de-freezure of the petitioner's bank account forthwith."

Core principles established include the equitable condonation of delay caused by bona fide pursuit of rectification remedies, the necessity for appellate authorities to consider explanations for delay before rejecting appeals on limitation grounds, and the balancing of revenue protection with the appellant's right to appeal through conditional admission subject to pre-deposit.

Final determinations were that the delay in filing appeal was condoned, the rejection of appeal on limitation grounds was set aside, the appeal was admitted subject to a