Petitioner can avail efficacious remedy to file Appeal if writ petition is dismissed

[CA Bimal Jain]

The Hon’ble Madras High Court in M & ARUN TEX, (REP. BY ITS PROPRIETOR SHRI S. ARUNKUMAR) , M/S. RAVI TEX, (REP. BY ITS PROPRIETOR SHRI. P. RAVICHANDRAN) VERSUS STATE TAX OFFICER - 2023 (11) TMI 664 - MADRAS HIGH COURT dismissed the writ petition because in the present case, the Input Tax Credit (“the ITC”) was disallowed and the same will not have any impact on the Petitioners inasmuch disallowing the ITC will affect the beneficiary who availed it. As against the Petitioners, penalty, and interest were fastened based on the search conducted and the documents seized at the premises of the Petitioners, where it was found that the Petitioners had indulged in the creation of bogus invoices and did not conduct any business activities neither any goods were sold or received in the premises. Considering the fact, that the Petitioner had not been deprived of any constitutional rights and that there was efficacious appeal remedy available to the Petitioners, to prefer appeals before the appropriate authority within a period of 30 days from the date of receipt of a copy of this order, without insisting upon the aspect of limitation.

Facts:

M&Arun Tex (“the Petitioner”) was engaged in buying and selling yarn. The Revenue Department (“the Respondent”) visited the premises of the Petitioners and observed that there was no trace of any business activity. It was noticed that the Petitioner effected the outward and inward supply of cotton yarn from M/s. Sri Karunambikai Mills Pvt. Ltd. The Petitioner availed ITC and utilized it for payment of outward liability from July 2017 to  March 2018. The Respondent concluded that the cotton yarn purchased and sold by the Petitioners had not been received on the premises. Thereby, a Show Cause Notice (“SCN”) dated May 05, 2020, was issued to the Petitioner and was proposed to disallow the ITC availed with interest and penalty.

The Petitioners filed a reply to the SCN, stating that the purchase and sale made by them were genuine and that appropriate GST returns were filed. The transportation was arranged by the suppliers and payments towards purchase was settled through banking channels. Thereafter, the Respondent passed the Order dated September 30, 2020, (“the Impugned Order”) stating that the Petitioners have indulged in circular trading without movement of goods with an intention to avail irregular ITC and accordingly, disallowed ITC availed by the Petitioners along with interest and penalty under Section 74 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”).

Hence, aggrieved by the Impugned Order the Petition filed the writ petition.

Issue:

If the writ petition is dismissed, can the Petitioner file appeal before the Appellate Authority?

Held:

The Madras High Court in M & ARUN TEX, (REP. BY ITS PROPRIETOR SHRI S. ARUNKUMAR) , M/S. RAVI TEX, (REP. BY ITS PROPRIETOR SHRI. P. RAVICHANDRAN) VERSUS STATE TAX OFFICER - 2023 (11) TMI 664 - MADRAS HIGH COURT. held as under:

• Observed that, in the present case, only the ITC alone was disallowed and the same will not have any impact on the Petitioners in as much disallowing the ITC will affect the beneficiary who availed it.
• Opined that, penalty and interest were fastened based on the search conducted and the documents seized at the premises of the Petitioners, where it was found that the Petitioners had indulged in the creation of bogus invoices, and they had not at all conducted any business activities. It was concluded that the cotton yarn purchased and sold by the Petitioners had not been received on the premises. It is not the case of the Petitioners that no opportunity was afforded during adjudication of the proceedings and passing the Impugned Orders. The Court did not find any violation of principles of natural justice and deprival of any constitutional rights.
• Held that, the writ petition is dismissed. However, considering the facts, an efficacious appeal remedy was available to the Petitioners, without adverting to the grounds raised by the Petitioners in respect of the Impugned Order. The Court granted liberty to the Petitioners to prefer appeals before the appropriate authority within a period of 30 days from the date of receipt of a copy of this order, without insisting upon the aspect of limitation.

Author can be reached at info@a2ztaxcorp.com)