2025 (6) TMI 510 - HC - GST

Reversal of ITC - double taxation - petitioner was not aware as no intimation was given by the respondent-Authority - appeal dismissed on ground of delay - HELD THAT - It appears that it is not in dispute that the petitioner has reversed the ITC for the period 2017-18 on 19.10.2018 and therefore the respondent could not have assumed the jurisdiction to issue the impugned notice on the ground that the petitioner has failed to reverse the ITC. Moreover the petitioner has also admitted that as the GST Portal was new the petitioner was not familiar with such portal and could not verify the uploading of the notice and subsequent Order-in-Original on the portal and the petitioner came to know about the same only when the Order-in-Original was served in physical form on 03.05.2024 and the petitioner has already preferred an Appeal before 06.05.2024 however Appellate Authority has not condoned the delay as per the provisions of Section 107 of the GST Act and therefore the petitioner had no option but to file the present petition. It also appears that the respondent has not disputed about the reversal of the ITC by the petitioner for the period 2017-18 and only contention raised is that there is no reconciliation available with the respondent regarding the ITC reversed by the petitioner for the years 2017-18 and 2018-19. In such circumstances only remedy available is to quash the impugned Order-in-Original and remand the matter back to the respondent-Authority to verify the reversal of the ITC made by the petitioner for the period 2017-18 in accordance with law and pass appropriate fresh de novo order in accordance with law. Conclusion - i) The impugned show cause notice and Order-in-Original dated 22.12.2023 were quashed as being without jurisdiction and arbitrary. ii) The petitioner s appeal was dismissed by the Appellate Authority on delay grounds but the Court recognized the petitioner s lack of knowledge due to non-communication. The impugned Order-in-Original dated 22.12.2023 is hereby quashed and set aside. The matter is remanded back to the respondent-Adjudicating Authority to pass a fresh de novo order within a period of twelve weeks from the date of receipt of the copy of this order - petition disposed off by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the impugned show cause notice dated 27.09.2023 issued under Section 73 of the GST Act and the subsequent orders dated 22.12.2023 and 21.06.2024 are without jurisdiction, arbitrary, and illegal?

- Whether the petitioner had already reversed the Input Tax Credit (ITC) attributable to exempt supplies as required under the GST Act and Rules, thereby negating the basis for the demand raised?

- Whether the impugned order confirming demand of tax with interest and penalty on the ground of non-reversal of ITC is liable to be quashed as it results in double taxation?

- Whether the petitioner was duly informed of the show cause notice and order, and if lack of communication affects the validity of the proceedings?

- Whether the delay in filing the appeal against the order dated 22.12.2023 can be condoned under Section 107(4) of the GST Act, especially when the petitioner was unaware of the order due to non-receipt of notice?

- Whether Section 107(4) of the GST Act, which bars condonation of delay in filing appeals even when delay is satisfactorily explained, violates Articles 14 and 19(1)(g) of the Constitution of India?

2. ISSUE-WISE DETAILED ANALYSIS

a) Jurisdiction and Legality of the Impugned Show Cause Notice and Orders

The relevant legal framework includes Section 73 of the GST Act, which empowers authorities to issue show cause notices for recovery of tax not paid or short paid, and Sections 16(4) and (9) regarding reversal of ITC attributable to exempt supplies. The petitioner contended that the impugned show cause notice and orders were issued without jurisdiction since the ITC had already been reversed in 2018.

The Court noted that the petitioner had reversed ITC on 19.10.2018, reflected in Form GSTR-3B, annual return Form GSTR-9, and reconciliation statement Form GSTR-9C for 2018-19. The respondent-Authority did not dispute the reversal but contended that reconciliation was not available with them, thus justifying the issuance of the notice and order.

The Court held that since the petitioner had reversed the ITC for the relevant period, the issuance of the show cause notice and order on the ground of non-reversal was without jurisdiction. The demand raised amounted to double taxation. The Court emphasized that the respondent-Authority must verify the reversal details before initiating recovery proceedings.

b) Reversal of Input Tax Credit and Double Taxation

The petitioner submitted detailed computations showing ITC availed and reversed for financial years 2017-18 and 2018-19, demonstrating reversal of over Rs. 38 lakhs. This was supported by ledger entries and statutory returns. The petitioner relied on a precedent where similar facts led to quashing of demand for non-reversal of ITC.

The Court accepted the petitioner's evidence and found that the ITC reversal was made in compliance with Sections 16(4), 16(9), and Rules 42 and 43 of the GST Rules. Consequently, the demand for tax on the same amount was unjustified and amounted to double taxation.

c) Communication and Knowledge of Show Cause Notice and Order

The petitioner's email address registered on the GST portal had been deactivated due to non-renewal of domain charges. The show cause notice and order were uploaded on the portal but no intimation was sent to the petitioner. The petitioner was unaware of these proceedings until a physical copy of the order was served on 03.05.2024 following a telephonic inquiry by the jurisdictional officer.

The Court observed that the petitioner was not familiar with the GST portal and could not verify the uploaded documents. It held that mere uploading on the portal without adequate intimation does not constitute proper service, especially when the registered email was inactive. This lack of communication prevented the petitioner from timely responding or filing appeals.

d) Delay in Filing Appeal and Section 107(4) of the GST Act

The petitioner filed an appeal on 06.05.2024 challenging the order dated 22.12.2023, but the Appellate Authority rejected it on the ground of delay in filing. The petitioner argued that the delay was caused due to lack of knowledge of the order and sought condonation of delay.

Section 107(4) of the GST Act prohibits condonation of delay in filing appeals, even where delay is satisfactorily explained. The petitioner challenged this provision as manifestly arbitrary, discriminatory, and violative of Articles 14 (equality before law) and 19(1)(g) (right to practice any profession or carry on any occupation) of the Constitution.

The Court did not expressly rule on the constitutional validity of Section 107(4) in this judgment but noted the petitioner's grievance and the hardship caused by the bar on condonation of delay, especially where the petitioner was unaware of the order due to non-communication.

e) Remedy and Remand for Fresh Adjudication

Given the admitted reversal of ITC and the lack of reconciliation on the part of the respondent-Authority, the Court found that the appropriate course was to quash the impugned Order-in-Original dated 22.12.2023 and remand the matter for fresh adjudication. The respondent-Authority was directed to verify the reversal of ITC made by the petitioner for 2017-18 and pass a fresh order de novo within twelve weeks in accordance with law.

3. SIGNIFICANT HOLDINGS

"It appears that it is not in dispute that the petitioner has reversed the ITC for the period 2017-18 on 19.10.2018 and therefore, the respondent could not have assumed the jurisdiction to issue the impugned notice on the ground that the petitioner has failed to reverse the ITC."

"The respondent has not disputed about the reversal of the ITC by the petitioner for the period 2017-18 and only contention raised is that there is no reconciliation available with the respondent regarding the ITC reversed by the petitioner for the years 2017-18 and 2018-19. In such circumstances, only remedy available is to quash the impugned Order-in-Original and remand the matter back to the respondent-Authority to verify the reversal of the ITC made by the petitioner for the period 2017-18 in accordance with law and pass appropriate fresh de novo order in accordance with law."

Core principles established include the necessity of proper jurisdiction before issuing show cause notices and passing orders, the requirement of adequate communication to the taxpayer especially when electronic communication fails, and the avoidance of double taxation by verifying ITC reversal before raising demands.

Final determinations:

• The impugned show cause notice and Order-in-Original dated 22.12.2023 were quashed as being without jurisdiction and arbitrary.
• The matter was remanded to the respondent-Authority for fresh adjudication after verifying ITC reversal.
• The petitioner's appeal was dismissed by the Appellate Authority on delay grounds, but the Court recognized the petitioner's lack of knowledge due to non-communication.
• The petition was disposed of with no order as to costs.