Facts of the Case

The petitioner filed the writ petition seeking issuance of a Writ of Mandamus to declare the Assessment-cum-Penalty-cum-Interest Order bearing AAO No. DIN 3727092216416 dated 27.09.2022, passed by the first respondent for the tax periods June 2021 to November 2021 under the CGST, A.P. GST and IGST Acts, 2017, as being without jurisdiction, without authority and violative of the principles of natural justice, and consequently sought setting aside of the said order.

The petitioner had filed a reply dated 02.09.2022, stating that goods had been purchased from various suppliers, including M/s Solar Enterprises, M/s Galaxy Traders, M/s Kharur Enterprises, M/s Sri Venkateswara Traders, M/s Thirumala Old Scrap, M/s Universal Enterprises, Alhadeed Iron and Metal Junction and M/s Lalitha Traders, under tax invoices and E-Way Bills.

During the personal hearing held on 22.09.2022, the petitioner again submitted that the purchases were supported by purchase invoices and E-Way Bills. The petitioner further contended that the goods had actually been received and that action, if warranted, ought to be initiated against the suppliers rather than the recipient.

The petitioner also relied upon certain case laws to contend that responsibility rested upon the suppliers and that the recipient should not be penalised. However, the assessing authority rejected the reply and cited Section 155, observing that the burden of proof lies upon the person claiming input tax credit to establish that the tax had been paid.

The High Court’s order records these facts and the disputed reasoning of the assessing authority in detail.

Issues Involved

The principal issues before the High Court were:

  1. Whether the impugned Assessment-cum-Penalty-cum-Interest Order was legally sustainable when the assessing authority had not properly considered the petitioner’s explanation and objections.
  2. Whether a mere statement that the taxpayer’s reply and cited case laws were “verified and not tenable” constituted adequate consideration and a reasoned determination.
  3. Whether the assessing authority could reject the petitioner’s defence merely by referring to the burden of proof under Section 155, without examining in the right perspective the petitioner’s specific factual contentions regarding purchases under tax invoices, E-Way Bills and receipt of goods.
  4. Whether the petitioner had been afforded an effective opportunity to substantiate its reply.
  5. Whether an order of a public authority must disclose reasons after considering the factual and legal arguments submitted by the affected party.

Petitioner’s Arguments

The petitioner contended that the impugned order had been passed without properly considering the explanation and objections placed before the assessing authority.

It was specifically argued that:

  • The reply dated 02.09.2022 clearly identified the firms from which the goods had been purchased.
  • The purchases were stated to be supported by tax invoices and E-Way Bills.
  • The petitioner had contended that action should be initiated against the concerned suppliers rather than against the recipient.
  • The petitioner stated that the goods had actually been received.
  • Relevant case laws had been relied upon in support of the proposition that the supplier was responsible and the recipient ought not to be punished.
  • Despite these specific submissions, the assessing authority merely stated that the reply and cited case laws had been verified and were not tenable.
  • The authority relied upon Section 155 to state that the burden of proof lay upon the person claiming input tax credit.
  • No proper reasons were given for rejecting the petitioner’s factual and legal submissions.
  • The petitioner’s explanation was not considered in the correct perspective.
  • No adequate opportunity was afforded to the petitioner to substantiate its reply.

These submissions are expressly reflected in the judgment.

Respondent’s Arguments

The judgment records that the matter was heard with the learned Government Pleader for Commercial Tax appearing for the respondent side.

The impugned assessment order, representing the Revenue’s position, proceeded on the basis that:

  • The petitioner’s reply and the case laws relied upon had been verified but were considered “not tenable”.
  • Under Section 155, the burden of proof lies upon the person claiming input tax credit.
  • The claimant was required to prove that the relevant tax had been paid.

However, the High Court found that the petitioner’s specific factual objections—particularly the contention regarding purchases from identified firms under tax invoices and E-Way Bills and the submission that action should be taken against suppliers rather than the recipient—had not been considered and decided in the right perspective.

Court Order / Findings

The Andhra Pradesh High Court found substantial force in the submissions advanced on behalf of the petitioner.

The Court made the following significant findings:

  • Orders passed by public authorities must be supported by reasons.
  • Such reasons must emerge after considering the arguments on facts and law submitted by the parties.
  • The petitioner had clearly identified the concerned firms from which goods were allegedly purchased.
  • The petitioner had stated that such purchases were made under tax invoices and E-Way Bills.
  • The petitioner had specifically contended that action should be initiated against the suppliers and not against the recipient.
  • This aspect had not been considered and decided in the right perspective by the assessing authority.
  • Consequently, the impugned assessment order was not sustainable in law and was liable to be set aside.

Accordingly, the High Court:

  • Allowed the writ petition;
  • Set aside the Assessment-cum-Penalty-cum-Interest Order bearing AAO No. DIN 3727092216416 dated 27.09.2022;
  • Directed the first respondent to consider the objections raised by the petitioner in its reply;
  • Directed that the petitioner be afforded an opportunity of personal hearing;
  • Directed the authority to consider the submissions and pass an appropriate order in accordance with the governing law and rules, expeditiously;
  • Made no order as to costs; and
  • Closed the pending miscellaneous petition, if any.

This operative direction appears in paragraph 7 of the uploaded order.

Important Clarification

This judgment is particularly important because the High Court did not finally adjudicate the petitioner’s substantive entitlement to Input Tax Credit on merits, nor did it hold that mere possession of tax invoices and E-Way Bills automatically establishes ITC eligibility.

The essential basis of interference was that the assessing authority had failed to properly consider and decide the petitioner’s specific factual and legal objections and had not supported its rejection with adequate reasons.

Therefore, the correct legal takeaway is:

A GST assessment order cannot be sustained merely because the authority refers to the burden of proof under Section 155 and summarily rejects the taxpayer’s reply. Specific objections, supporting documents, factual submissions and legal arguments must be considered in the proper perspective, and the decision of the public authority must be supported by reasons.

The matter was effectively remitted for fresh consideration after granting an opportunity of personal hearing; the Court did not itself grant final ITC relief on merits.

Sections / Legal Provisions Involved

Section 155 of the CGST Act, 2017 — Burden of proof in relation to eligibility for Input Tax Credit lies upon the person claiming such credit.

Corresponding provisions of the A.P. GST Act, 2017 — Applicable to the State GST component of the dispute.

CGST Act, 2017 — The impugned assessment proceedings concerned liability under the Central GST framework.

A.P. GST Act, 2017 — The proceedings also involved the Andhra Pradesh State GST framework.

IGST Act, 2017 — The impugned order was also stated to have been passed under the IGST statutory framework.

Principles of Natural Justice — Particularly meaningful consideration of objections, reasoned decision-making and effective opportunity of personal hearing.

Article 226 of the Constitution of India — Writ jurisdiction invoked for issuance of a Writ of Mandamus against the impugned assessment order.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783151262_836compressed.pdf

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