Facts of the Case

The petitioner, M/s Raj Laxmi Sales Agency, is a proprietorship firm engaged in business in Patna, Bihar. The Assistant Commissioner of State Tax (Assessing Authority) passed an ex parte assessment order dated 19.02.2022 under Section 73 of the CGST/BGST Act, 2017, along with a summary of the order in Form GST DRC-07. This order raised a demand primarily by treating the mismatch between the auto-populated Form GSTR-2A and the returns filed in Form GSTR-3B as a ground to deny Input Tax Credit (ITC).

Aggrieved by the assessment order, the petitioner preferred an statutory appeal under Section 107 of the Act before the Additional Commissioner of State Taxes (Appeals), East Division, Patna. However, via an ex parte order dated 17.08.2022, the Appellate Authority rejected the appeal summarily, solely on the grounds of being barred by limitation, without examining the core dispute on its merits. The petitioner subsequently filed a writ petition before the Patna High Court to challenge both the appellate and original assessment orders.

Issues Involved

  1. Whether the Appellate Authority was justified in dismissing the statutory appeal under Section 107 of the CGST/BGST Act, 2017, on the grounds of limitation, despite the prevalent disruptions caused by the COVID-19 pandemic.
  2. Whether the lack of an auto-populated entry in Form GSTR-2A can automatically deprive a taxpayer of their substantive right to claim Input Tax Credit (ITC) under Section 16 of the CGST Act, 2017.

Petitioner’s Arguments

  • The petitioner contended that the delay in preferring the statutory appeal before the Appellate Authority was not intentional but stood fully and sufficiently explained on account of the regulatory and health disruptions caused by the COVID-19 restrictions.
  • On the substantive merits of the assessment, the petitioner argued that the mere absence of transactions in the auto-populated Form GSTR-2A resulting in a mismatch with Form GSTR-3B cannot be a valid legal basis to deprive a registered dealer of the benefit of Input Tax Credit (ITC).
  • The petitioner further asserted that the legal framework under Section 16(2) and Rule 36 of the CGST Rules does not restrict the right to avail ITC strictly within the same calendar month, as Section 16(4) explicitly permits the availment and utilization of ITC for a past financial year up to the due date of filing returns for the month of September of the succeeding financial year.

Respondent’s Arguments

  • The State Revenue initially stood by the statutory timelines prescribed under Section 107 of the CGST/BGST Act, 2017, which restrict the condonable period for filing appeals.
  • However, during the course of the hearing, the learned counsel for the Revenue conceded that the delay was influenced by the pandemic timeline and stated that the Revenue had no objection if the impugned ex parte appellate order was set aside and the matter was remanded back to the Appellate Authority for a fresh adjudication on merits, provided the pre-deposit conditions were met.

Court Order / Findings

The Division Bench of the Patna High Court, comprising Hon’ble Chief Justice Sanjay Karol and Hon’ble Justice Partha Sarthy, observed that the delay in filing the statutory appeal stood sufficiently explained on account of the operational limitations brought about by COVID-19 restrictions.

Taking note of the mutual agreement of both counsels, the High Court ordered the following:

  • The impugned appellate order dated 17.08.2022 was quashed and set aside, and the appeal was restored to its original file and number.
  • The court directed the Appellate Authority to condone the delay, accept the petitioner’s statutory 10% pre-deposit (which the petitioner stated was already deposited), and decide the appeal entirely on its merits.
  • The Court ordered the immediate de-freezing and de-attaching of the petitioner's bank accounts if they had been attached in connection with these recovery proceedings.
  • The Appellate Authority was directed to pass a reasoned, speaking order within a preferred period of two months from the petitioner's appearance date (19.12.2022), after giving adequate opportunity to be heard and to place essential documents on record.
  • No coercive steps are to be taken against the petitioner during the pendency of the remanded appeal.
  • The High Court explicitly noted that it did not express any opinion on the merits of the GSTR-2A vs GSTR-3B ITC mismatch dispute, leaving all substantive issues open for the Appellate Authority to adjudicate.

Important Clarification

This ruling underscores a crucial procedural safeguard for taxpayers: technical barriers such as statutory limitation periods must be weighed against extraordinary circumstances like a global pandemic. It highlights that appellate authorities should prioritize substantive natural justice over rigid procedural dismissals when delays are linked to periods protected by pandemic-related reliefs (such as the extension of limitation orders directed globally by the Supreme Court of India in In Re: Cognizance for Extension of Limitation). Furthermore, it confirms that if the mandated 10% pre-deposit under Section 107 is satisfied, the taxpayer is entitled to a comprehensive hearing on merits, alongside the restoration of operational assets like attached bank accounts.

Section Involved

  • Section 107 of the Central Goods and Services Tax (CGST) Act, 2017 / Bihar Goods and Services Tax (BGST) Act, 2017 (Appeals to Appellate Authority).
  • Section 16 of the Central Goods and Services Tax (CGST) Act, 2017 / Bihar Goods and Services Tax (BGST) Act, 2017 (Eligibility and conditions for taking Input Tax Credit).
  • Section 73 of the Central Goods and Services Tax (CGST) Act, 2017 / Bihar Goods and Services Tax (BGST) Act, 2017 (Determination of tax not paid or short paid).
  • Rule 36 of the Central Goods and Services Tax (CGST) Rules, 2017 / Bihar Goods and Services Tax (BGST) Rules, 2017.

Link to download the order - https://mytaxexpert.co.in/uploads/1783142867_489compressed.pdf

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