2025 (6) TMI 112 - HC - GST

Recovery of Input Tax Credit (ITC) - amount duplicated in the notices - amount was deposited by the Petitioner during investigation - HELD THAT - The Court has examined the matter and it is prima facie seen that the amount of Rs. Rs.60, 73, 541/- is duplicated as captured in the impugned Order-in-Original. The Petitioner would be permitted to prefer appeals challenging both the orders dated 1st February 2025 and 4th February 2025 and a pre-deposit qua the demand of Rs. 2, 83, 56, 714/- shall be paid in filing the appeal challenging the impugned order 1st February 2025. In the second appeal no pre-deposit shall be paid on the grounds of duplication - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the demand for recovery of Input Tax Credit (ITC) in the two impugned Orders-in-Original, particularly the amount of Rs. 60,73,541/-, involves duplication of demand and whether such duplication vitiates the demand or pre-deposit obligations.

(b) Whether the amount deposited by the Petitioner during the course of investigation (Rs. 1,16,47,808/-) can be adjusted against the pre-deposit required for filing appeals under Section 107 of the Central Goods and Services Tax (CGST) Act.

(c) The procedural question regarding the Petitioner's entitlement to cross-examine witnesses or inspect the investigation file during adjudication and whether denial of such opportunity is justified.

(d) The permissibility of filing appeals beyond the limitation period, considering the directions for adjustment and pre-deposit granted by the Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Duplication of Demand of Rs. 60,73,541/-

Relevant legal framework and precedents: The CGST Act empowers the tax authorities to issue Show Cause Notices (SCNs) for recovery of wrongly availed ITC. However, principles of natural justice and protection against double recovery require that demands are not duplicated across multiple notices or orders. Precedents emphasize that duplication of demand is impermissible and leads to invalidity of the duplicated portion of demand.

Court's interpretation and reasoning: The Court observed that the demand of Rs. 60,73,541/- appearing in both the impugned orders is duplicated. This duplication was acknowledged in the impugned Order-in-Original itself, where the adjudicating authority noted the Petitioner's contention regarding multiple SCNs and duplication.

Key evidence and findings: The Petitioner's replies and submissions pointed out the duplication. The adjudicating authority's own findings in the impugned orders confirmed the duplication but held that the taxpayer must discharge the entire liability before seeking appropriation.

Application of law to facts: The Court held that duplication of demand cannot stand and directed that no pre-deposit shall be required on the duplicated amount of Rs. 60,73,541/- in the appeal against the second impugned order.

Treatment of competing arguments: While the adjudicating authority rejected the Petitioner's contention and held all allegations to be true, the Court found merit in the Petitioner's objection regarding duplication and adjusted the pre-deposit accordingly.

Conclusions: The Court concluded that the duplicated amount should not be subject to pre-deposit for the purpose of appeal, thereby preventing double recovery.

Issue (b): Adjustment of Amount Deposited During Investigation Against Pre-Deposit

Relevant legal framework and precedents: Section 107 of the CGST Act requires pre-deposit of a specified percentage of the tax demand before filing an appeal. The law permits adjustment of amounts already deposited towards the liability to avoid multiple payments. Precedents recognize the principle of avoiding double payment and allowing adjustment of amounts deposited during investigation or adjudication.

Court's interpretation and reasoning: The Court acknowledged the Petitioner's submission that Rs. 1,16,47,808/- deposited during investigation should be adjusted against the pre-deposit requirement. The Court found this submission reasonable and consistent with the principles of equity and avoidance of multiplicity of payments.

Key evidence and findings: The Petitioner produced evidence of deposit during investigation. The Court noted the absence of any statutory bar or procedural impediment to such adjustment.

Application of law to facts: The Court directed that the amount deposited by the Petitioner during investigation be adjusted for the purpose of calculating the pre-deposit while filing appeals under Section 107 of the CGST Act.

Treatment of competing arguments: The GST Department did not oppose this adjustment explicitly in the record. The Court's direction reflects a balancing of interests, ensuring that the Petitioner is not unduly burdened by multiple payments.

Conclusions: The Court permitted adjustment of the deposited amount against the pre-deposit obligation, facilitating the Petitioner's right to appeal without additional financial hardship.

Issue (c): Denial of Cross-Examination and Inspection of Investigation File

Relevant legal framework and precedents: The CGST adjudication process allows the adjudicating authority discretion to permit cross-examination and inspection of documents. However, procedural timelines and case management considerations may justify denial of such requests. Principles of natural justice require a fair opportunity but do not mandate unlimited procedural rights.

Court's interpretation and reasoning: The impugned order denied the Petitioner's request for cross-examination and inspection citing paucity of time and discretion of the adjudicating authority. The Court noted this reasoning but did not interfere with the discretion exercised as it was within the procedural framework and timelines.

Key evidence and findings: The adjudicating authority's order recorded the denial and the reasons thereof. The Petitioner was provided personal hearing opportunities.

Application of law to facts: The Court found that the opportunity for personal hearing sufficed and that denial of cross-examination or inspection was a procedural decision within the authority's discretion.

Treatment of competing arguments: The Petitioner's request for cross-examination was weighed against the need for timely adjudication. The Court upheld the authority's decision without prejudice to the Petitioner's right to raise issues in appeal.

Conclusions: The denial of cross-examination and inspection was justified and did not vitiate the proceedings.

Issue (d): Filing of Appeals Beyond Limitation Period and Mode of Filing

Relevant legal framework and precedents: Appeals under Section 107 of the CGST Act are subject to limitation periods. However, courts have discretion to condone delay or permit filing beyond limitation where justified. Procedural rules allow physical filing in exceptional circumstances.

Court's interpretation and reasoning: The Court directed that the Petitioner may file both appeals by 15th July, 2025 and that such appeals shall not be dismissed as barred by limitation. The Court also permitted physical filing if online filing proves difficult due to adjustment of pre-deposit.

Key evidence and findings: The Court recognized practical difficulties faced by the Petitioner in online filing due to the adjustment directions.

Application of law to facts: The Court exercised its discretion to ensure the Petitioner's substantive rights to appeal are not defeated by procedural technicalities or limitation.

Treatment of competing arguments: The GST Department did not oppose the extension or physical filing. The Court balanced procedural compliance with access to justice.

Conclusions: The Court allowed filing of appeals beyond limitation and permitted physical filing, ensuring procedural fairness.

3. SIGNIFICANT HOLDINGS

The Court established the following core