2025 (5) TMI 143 - HC - GST

Demand of differential Input Tax Credit (ITC) - imposition of interest and penalty f or the commission of the offence under Section 122(2)(a) r/w Section 73(9) of CGST /TNGST Act 2017 and Section 20 of IGST Act 2017 - issuance of Form GST DRC - 07 - HELD THAT - From perusal of the assessment order we find that the reply of the assessee / the appellant herein been considered and found neither the judgments relied by him is applicable to his case nor the contention that the mismatch was due to payment under different head wrongly is correct. The respondent herein after discussing the law and the facts of the case at paragraph 10 of the order had assigned reason for not accepting the explanation given. In the order the assessee is informed about the right of appeal available to him under the statute. While so when alternate efficacious remedy provided under the statute the appellant without availing the remedy under the statute by filing the appeal after deposit of 10% of the duty and penalty demanded to circumvent the condition had approached the High Court invoking the writ jurisdiction. We also find that the statute provides for rectifying the defective or erroneous filing of return under wrong provision/ Form. The appellant had not come forward either prior to the show cause notice or after it or during the detailed scrutiny of his account to rectify the account. Only after the issuance of Show Cause Notice taking cue from the judgment of the High Court and the circulars issued regarding limitation for rectification a defence of wrong payment and withdrawal is put forth. Even now the appellant is not left without remedy. The Learned Single Judge has preserved his right of appeal and the grounds of appeal to be tested before the Appellate Authority. Therefore we find no reason to interfere in the order of the learned single Judge passed in W.P(MD)No.6457 of 2025 dated 11.03.2025. Hence the writ appeal stands dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the assessment order confirming the demand of differential Input Tax Credit (ITC) and imposing interest and penalty under the CGST/TNGST Act and IGST Act was passed in accordance with law and departmental circulars.

- Whether the appellant was denied the opportunity to rectify the alleged mismatch in ITC claims before the assessment and penalty orders were passed.

- Whether the writ petition challenging the assessment and penalty orders was maintainable in view of the statutory remedy of appeal available under Section 107 of the CGST Act.

- Whether the appellant's failure to avail the statutory appellate remedy before approaching the High Court by writ petition warranted dismissal of the writ petition.

- Whether the judgments and departmental circulars relied upon by the appellant, which treat certain ITC mismatches as rectifiable errors, were applicable to the facts of the present case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Assessment Order Confirming Demand of ITC Difference, Interest and Penalty

Relevant legal framework and precedents: The assessment was made under the provisions of the CGST/TNGST Act, 2017 and IGST Act, 2017, specifically invoking Section 122(2)(a) read with Section 73(9) for penalty imposition. The appellant relied on departmental circulars and judicial precedents which treat mismatches in ITC claims due to wrong filing of GSTR-1 or GSTR-3B as errors that can be rectified.

Court's interpretation and reasoning: The Court examined the assessment order and found that the assessing authority had duly considered the appellant's explanation and documents submitted in response to the show cause notice. The authority rejected the appellant's contention that the mismatch was due to payments made under different heads mistakenly. The Court noted that the authority had given detailed reasons at paragraph 10 of the order for non-acceptance of the explanation.

Key evidence and findings: The appellant's reply dated 13.12.2024 and supporting documents were considered but found insufficient to establish that the ITC mismatch was a rectifiable error. The authority's reasoning was that the appellant had not demonstrated that the excess ITC claimed was due to mere clerical or filing errors.

Application of law to facts: Since the appellant failed to establish that the excess ITC claimed was a rectifiable error, the demand of tax difference, interest, and penalty was upheld. The Court emphasized that the assessment and penalty orders were passed after due consideration of the appellant's submissions and in accordance with the statutory provisions.

Treatment of competing arguments: The appellant argued that the circulars and judgments supported rectification of such errors without penalty. The Court distinguished the facts, holding that the appellant's case did not fall within the ambit of those precedents as the explanation was not accepted by the authority.

Conclusion: The assessment order confirming the demand and penalty was valid and legally sustainable.

Issue 2: Denial of Opportunity to Rectify ITC Mismatch

Relevant legal framework and precedents: Departmental circulars and judicial pronouncements have indicated that certain ITC mismatches arising from erroneous filing can be rectified by the taxpayer, provided the rectification is made within the prescribed time.

Court's interpretation and reasoning: The Court found that the appellant did not attempt to rectify the mismatch either before issuance of the show cause notice or during the detailed scrutiny. The defense of wrong payment and withdrawal was raised only after the show cause notice was issued, apparently taking cue from judgments and circulars. The Court observed that the statute provides for rectification but the appellant failed to avail that remedy in a timely manner.

Key evidence and findings: The appellant's conduct showed no initiative to rectify the returns or ITC claims before the show cause notice. The statutory provisions were available for rectification but remained unutilized.

Application of law to facts: Since the appellant did not avail the rectification remedy timely, the assessing authority was justified in proceeding with the assessment and penalty without granting further opportunity to rectify.

Treatment of competing arguments: The appellant contended that the assessment was contrary to circulars and judgments allowing rectification. The Court held that such relief is contingent upon timely action by the taxpayer, which was absent here.

Conclusion: No violation of natural justice or denial of opportunity to rectify was found.

Issue 3: Maintainability of Writ Petition in View of Statutory Remedy of Appeal

Relevant legal framework: Section 107 of the CGST Act provides a statutory right of appeal against assessment orders to the Joint Commissioner of GST and CE (Appeals). The statute prescribes the procedure and conditions for filing appeals.

Court's interpretation and reasoning: The Court noted that the learned Single Judge had correctly dismissed the writ petition on the ground that the appellant had an alternate efficacious remedy of appeal under the statute. The Single Judge had also granted liberty to file the appeal within a stipulated time and directed the appellate authority to dispose of the appeal expeditiously.

Key evidence and findings: The appellant had bypassed the statutory appellate remedy and directly approached the High Court by way of writ petition, apparently to circumvent the condition of depositing 10% of the duty and penalty demanded before filing appeal.

Application of law to facts: The Court emphasized that where an alternate remedy is provided by the statute, the writ jurisdiction is not ordinarily exercised. The appellant's failure to exhaust the statutory remedy warranted dismissal of the writ petition.

Treatment of competing arguments: The appellant argued that the writ petition was necessary due to illegality in the assessment and penalty orders. The Court held that such grounds can be tested in the statutory appeal and do not justify bypassing the statutory remedy.

Conclusion: The writ petition was not maintainable and the appellant was required to file appeal under Section 107 after complying with conditions.

Issue 4: Applicability of Judgments and Circulars Relied Upon by the Appellant

Relevant legal framework and precedents: The appellant relied on a judgment of this Court and an order of the Supreme Court in a special leave petition which held that certain ITC mismatches due to wrong filing are rectifiable errors.

Court's interpretation and reasoning: The Court examined the judgments and found that the facts of the present case were distinguishable. The assessing authority had considered the appellant's explanation and found the mismatch was not due to mere filing errors but due to substantive excess claim of ITC.

Key evidence and findings: The appellant's explanation was rejected after detailed scrutiny, and the authority's reasons were recorded in the assessment order. The Court held that the precedents cited were not applicable to the facts of the case.

Application of law to facts: Since the appellant's case did not fall within the scope of the cited precedents, those judgments did not provide a defense against the demand and penalty.

Treatment of competing arguments: The appellant's reliance on those judgments was negated by the factual findings of the authority and the Court.

Conclusion: The precedents and circulars relied upon were not applicable to the appellant's case.

3. SIGNIFICANT HOLDINGS

- "The reply of the assessee / the appellant herein been considered and found neither the judgments