2025 (7) TMI 203 - HC - GST

Violation of principles of natural justice - impugned order of assessment is an ex-parte order without considering the stand of the petitioner - suppression of turnover - invocation of extraordinary jurisdiction - HELD THAT - The order u/s 73(9) read with Rule 142(5) of the Central/Bihar Goods and Service Tax Act and Rule 2017 has been passed after the annual return furnished by the petitioner for the financial year 2018-19 was selected for scrutiny. The assessing authority noticed the suppression of turnover availment and utilization of input tax credit wrongly and delayed payment of tax. The liability on these accounts were quantified under the provisions of Section 73(1) of CGST/BGST Act. In respect of suppression of turnover the petitioner submitted that the mismatch in December 2018 return showing sales as per GSTR-3B at Rs.4, 83, 03, 934.70/- was due to a clerical mistake. The actual sale for the period as per GSTR 1 in B2C was Rs.48, 03, 934.00/-. Thus there was a difference of Rs.4, 35, 00, 000.00/- in the sales figure. Similarly there was a mismatch in January 2019 returns the sales as per GSTR 3B was Rs. 29, 00, 239.28/- exempted sales was at Rs.1, 68, 750.00/- and the total sales for the period was Rs.30, 68, 989.28/- but as per GSTR 1 in B2B it was Rs.4, 35, 626.48/- and as per B2C it was Rs.20, 05, 429.00/- the exempted sales was Rs. NIL which was said to be by way of mistake of accountant. Total sales for the period was Rs.24, 41, 055.48/-. Thus the difference amount in sale was Rs.6, 27, 933.80/- and the net differences was Rs.4, 41, 27, 934.50/-. The appellate authority has found that the appellant could not produce any evidence in terms of the clarifactory circular dated 27.02.2022 read with Section 16(2) (a) (b) (c) and (d). The petitioner has statutory remedy of appeal before the Tribunal still the petitioner has chosen to move this Court in its extraordinary writ jurisdiction. This Court is of the considered opinion that the impugned orders are neither suffering from violation of principles of natural justice nor this Court finds any jurisdictional error committed by the respondent authorities. The scope of interference with the impugned orders in the extraordinary writ jurisdiction of this Court cannot be extended so as to entertain the present writ application. This writ application is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this writ application include:

• Whether the ex-parte assessment order dated 06.12.2023 under Section 73(1) of the CGST/BGST Act, 2017, imposing tax, interest, and penalty on the petitioner for the financial year 2018-19, is illegal and liable to be quashed for non-consideration of the petitioner's submissions and records.
• Whether the demand order issued in Form DRC-07 dated 06.12.2023, raising a total liability of Rs.44,42,848/-, is valid and sustainable in law.
• Whether the appellate order dated 13.09.2024 rejecting the petitioner's appeal without proper consideration of facts and material on record is liable to be set aside.
• Whether the petitioner was denied principles of natural justice by the assessing and appellate authorities by passing orders without personal hearing and without examining supporting documents.
• Whether the petitioner is entitled to refund of the pre-deposit amount paid under Section 107(6)(b) of the CGST Act, 2017.
• Whether the petitioner is entitled to a fresh assessment order after proper verification and reconciliation of turnover and input tax credit as per GSTR-1, GSTR-3B, GSTR-2A, and GSTR-9 returns.
• Whether the excess input tax credit claimed by the petitioner, which was not reflected in GSTR-2A, is legally sustainable in light of Section 16(2) of the CGST/BGST Act and relevant judicial precedents.
• Whether the petitioner's challenge to the assessment and appellate orders can be entertained in writ jurisdiction, given the availability of statutory remedies before the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of the ex-parte assessment order dated 06.12.2023

Relevant legal framework and precedents: The assessment was carried out under Section 73(1) of the CGST/BGST Act, 2017, which deals with determination of tax not paid or short paid due to reasons other than fraud or willful misstatement. Rule 142(5) of the CGST Rules, 2017, governs the procedure for such assessments. The petitioner's challenge was that the order was ex-parte, passed without considering his submissions and supporting documents, violating principles of natural justice.

Court's interpretation and reasoning: The Court noted that the assessing authority issued a show cause notice (Form DRC-01) on 21.09.2023 calling upon the petitioner to explain the discrepancies. The petitioner did not respond or seek personal hearing before the assessing authority. The Court found that the show cause notice was duly served and the petitioner failed to avail the opportunity to be heard. The assessment order was thus passed in accordance with statutory procedure.

Key evidence and findings: The assessing authority identified suppression of turnover amounting to Rs.4,34,99,979.63/- by comparing GSTR-3B and GSTR-9 returns and found excess input tax credit claimed beyond entitlement as per GSTR-2A. The petitioner's failure to respond to the notice was undisputed.

Application of law to facts: Since the petitioner did not respond to the show cause notice or request personal hearing, the assessment order was not illegal or violative of natural justice. The Court emphasized that the petitioner had statutory remedies available but chose not to pursue them effectively.

Treatment of competing arguments: The petitioner argued clerical errors and reconciliation of returns were not considered, but no documentary evidence such as sale registers or audit reports were produced before the assessing authority. The respondents relied on statutory provisions and undisputed facts of non-response.

Conclusion: The ex-parte assessment order dated 06.12.2023 is valid and sustainable.

Issue 2: Validity of the demand order in Form DRC-07 dated 06.12.2023

Relevant legal framework: Demand orders under Section 73(1) of the CGST/BGST Act are issued after assessment to recover tax, interest, and penalty.

Court's reasoning: The demand order corresponds to the assessment order and quantifies the liability. Since the assessment order is valid, the demand order is also valid.

Conclusion: The demand order is not liable to be quashed.

Issue 3: Legality of the appellate order dated 13.09.2024

Legal framework and precedents: Appeals under CGST/BGST Act are governed by statutory provisions allowing reconsideration of assessment orders. The appellate authority is required to consider submissions and materials on record.

Court's interpretation and reasoning: The appellate authority considered the grounds of appeal, including the petitioner's claim of clerical errors in GSTR-3B returns and excess ITC claimed. It found no documentary evidence was produced to substantiate the claims. The appellate order refers to Section 16(2) of the CGST Act which restricts input tax credit to the extent reflected in GSTR-2A and requires the supplier to have paid tax. The Court noted the appellate authority's reliance on a prior decision upholding the constitutional validity of Section 16(2) and the clarificatory Circular No.183 dated 27.02.2022.

Key evidence: The petitioner admitted claiming ITC in excess of GSTR-2A figures and failed to produce certificates from suppliers as required under the circular. The appellate authority's detailed discussion and rejection of the appeal was based on these findings.

Application of law to facts: The appellate authority correctly applied Section 16(2) and related clarifications to deny excess ITC claimed. The petitioner's failure to substantiate clerical error claims weighed against him.

Treatment of competing arguments: The petitioner relied on judicial precedents from other High Courts suggesting recovery should be from the supplier, not recipient. The appellate authority distinguished these on facts and law, emphasizing statutory provisions and clarifications applicable to the financial year 2018-19.

Conclusion: The appellate order is legally sound and not liable to be set aside.

Issue 4: Alleged violation of principles of natural justice

Legal framework: Principles of natural justice require opportunity to be heard before adverse orders are passed.

Court's reasoning: The petitioner did not respond to the show cause notice or request personal hearing before the assessing authority. The appellate authority provided opportunity of hearing and considered submissions. The Court found no violation of natural justice.

Conclusion: No breach of natural justice occurred.

Issue 5: Refund of pre-deposit amount under Section 107(6)(b)

Legal framework: Section 107(6)(b) mandates pre-deposit of 10% of disputed tax amount before filing appeal.

Court's reasoning: The petitioner sought refund of Rs.2,28,936/- deposited as pre-deposit. The Court did not specifically adjudicate this issue in detail but dismissed the writ application, noting statutory remedies remain available to the petitioner.

Conclusion: No relief granted on refund claim in writ jurisdiction; petitioner may pursue statutory remedy.

Issue 6: Direction for fresh assessment considering reconciliation of returns

Court's reasoning: The petitioner requested fresh assessment based on reconciliation of GSTR-1, GSTR-3B, GSTR-2A, and GSTR-9. The Court observed that the petitioner failed to produce supporting evidence such as sale registers or audit reports before the authorities. The petitioner's failure to respond to show cause notice and non-availability of documentary proof militated against such direction.

Conclusion: No direction for fresh assessment issued by the Court.

Issue 7: Legality of excess input tax credit claimed beyond GSTR-2A

Relevant provisions: Section 16(2) of the CGST/BGST Act restricts input tax credit eligibility to the extent reflected in GSTR-2A and paid by the supplier. Circular No.183 dated 27.02.2022 clarifies procedures for differences up to Rs.5 lakh.

Court's reasoning: The petitioner admitted claiming ITC beyond GSTR-2A. The appellate authority found no evidence of supplier payment or certificates as required. The Court upheld the appellate authority's application of Section 16(2) and the circular, relying on prior judicial decisions affirming the constitutional validity of Section 16(2).

Conclusion: Excess ITC claimed beyond GSTR-2A is not legally sustainable.

Issue 8: Maintainability of writ application in presence of statutory remedy

Court's reasoning: The petitioner had statutory remedy of appeal before the Tribunal. The Court held that interference by writ jurisdiction is limited and not warranted in absence of jurisdictional error or violation of natural justice.

Conclusion: Writ application dismissed on maintainability grounds.

3. SIGNIFICANT HOLDINGS

"The petitioner had been served with a show cause notice dated 21.09.2023 but he did not respond to the said notice, therefore, the assessment order which has already been upheld by the appellate authority cannot be said to be in violation of principles of natural justice."

"The petitioner has admitted that he had claimed input tax credit in excess of what was reflected in GSTR-2A. In this view of the matter, the legal action for violation of Section 16(2) of the CGST/BGST Act is attracted."

"The constitutional validity of Section 16(2) has already been upheld by this Court in prior decisions, holding that the claim of input tax credit would not sustain when the supplier has not paid the tax to the Government despite collection from the purchasing dealer."

"The scope of interference with the impugned orders in the extraordinary writ jurisdiction of this Court cannot be extended so as to entertain the present writ application."

Core principles established include:

• Assessment orders passed after due service of show cause notices and opportunity to be heard cannot be set aside merely because the petitioner failed to respond or produce evidence.
• Input tax credit claims must comply with Section 16(2) of the CGST Act and related clarifications; excess claims beyond reflection in GSTR-2A and supplier payment are not sustainable.
• Writ jurisdiction is not a substitute for statutory appellate remedies and is limited to jurisdictional errors or violation of natural justice.
• Appellate authorities are empowered to reject appeals where the appellant fails to substantiate claims with evidence.

Final determinations:

• The ex-parte assessment order dated 06.12.2023 and the demand order dated 06.12.2023 are valid and sustainable.
• The appellate order dated 13.09.2024 rejecting the petitioner's appeal is legally sound and not liable to be set aside.
• No violation of principles of natural justice occurred during assessment or appeal proceedings.
• The petitioner's claim for refund of pre-deposit and direction for fresh assessment are not granted in writ jurisdiction.
• The writ application is dismissed, with liberty to the petitioner to pursue statutory remedies.