Facts of the Case

M/s Kumar Distributors Private Limited filed a writ petition before the Patna High Court challenging the appellate order contained in Memo No. 54 dated 20.04.2022 passed by the Additional Commissioner (Appeal) of State Taxes, Patna Western Division, Patna, in Appeal Case No. GST/PTC 178/2021-22.

The petitioner’s appeal had been dismissed solely on the ground of limitation. According to the petitioner, the appellate authority declined to adjudicate whether the petitioner was entitled to avail Input Tax Credit under Section 140 of the Bihar Goods and Services Tax Act, 2017 read with Rule 117 of the Bihar Goods and Services Tax Rules, 2017.

The petitioner claimed entitlement to Input Tax Credit amounting to Rs. 16,98,239.94. However, instead of allowing the Input Tax Credit, the Assistant Commissioner of State Tax had raised a demand notice dated 10.08.2019 in Form GST DRC-07, including interest and penalty, amounting to Rs. 24,67,543.

The petitioner challenged the rejection of the appeal under Section 107 of the Bihar GST Act, 2017 read with Rule 108(3) of the Bihar GST Rules, 2017, primarily on the ground that the appeal had been rejected solely as time-barred even though the relevant cause of action arose during the COVID-19 pandemic period.

Issues Involved

  1. Whether the appellate authority was justified in dismissing the petitioner’s GST appeal solely on the ground of limitation when the cause of action had arisen during the COVID-19 pandemic period.
  2. Whether the period affected by the COVID-19 pandemic was required to be excluded while computing limitation in view of the directions issued by the Hon’ble Supreme Court and the High Court.
  3. Whether the petitioner’s appeal concerning entitlement to Input Tax Credit under Section 140 of the Bihar GST Act, 2017 read with Rule 117 of the Bihar GST Rules, 2017 should be heard and decided on merits.
  4. Whether the appellate order dated 20.04.2022 rejecting the appeal on limitation was liable to be quashed and set aside.
  5. Whether the underlying claim of Input Tax Credit of Rs. 16,98,239.94 and the consequential demand of Rs. 24,67,543 raised through Form GST DRC-07 required consideration by the competent appellate authority on merits.

Petitioner’s Arguments

The petitioner contended that the appellate order was erroneous and illegal because the appeal had been dismissed only on the ground of limitation without adjudicating the substantive dispute regarding entitlement to Input Tax Credit.

It was argued that the petitioner was entitled to avail Input Tax Credit amounting to Rs. 16,98,239.94 under Section 140 of the Bihar GST Act, 2017 read with Rule 117 of the Bihar GST Rules, 2017.

The petitioner further challenged the demand notice dated 10.08.2019 issued in Form GST DRC-07, under which a demand including interest and penalty amounting to Rs. 24,67,543 had been raised.

A principal submission of the petitioner was that the cause of action had arisen during the COVID-19 pandemic period. Therefore, the authorities were required to take into account the directions issued by the Hon’ble Supreme Court as well as the High Court regarding exclusion of the pandemic period for the purpose of computation of limitation.

Accordingly, the petitioner sought quashing of the appellate order dated 20.04.2022 and restoration of the appeal for adjudication on merits.

Respondent’s Arguments

The judgment records the appearance of counsel for the Union of India and the State authorities. However, it does not separately reproduce any detailed substantive counter-arguments advanced by the respondents on the merits of the Input Tax Credit claim.

The Court considered the central issue that the appeal had been rejected solely on the ground of limitation and noted that the cause of action had arisen during the COVID-19 pandemic period, when directions concerning exclusion of the pandemic period for computation of limitation were operative.

Therefore, no additional or independent detailed respondent argument should be attributed beyond what is expressly reflected in the judgment.

Court Order / Findings

The Patna High Court found that the appellate order required interference because the petitioner’s appeal had been rejected solely on the ground of limitation.

The Court specifically noted that the cause of action had arisen during the COVID-19 pandemic period and that the authorities were fully aware of the directions issued by the Hon’ble Supreme Court as well as the High Court excluding the pandemic period for the purpose of computing limitation.

On this short ground alone, the High Court quashed and set aside the impugned order contained in Memo No. 54 dated 20.04.2022 and directed that the appeal be heard and decided on merits.

The writ petition was disposed of with the following directions:

  1. The petitioner shall approach Respondent No. 4, namely the Additional Commissioner (Appeal), Patna Western Division, Patna, within four weeks from the date of the judgment.
  2. The concerned authority shall consider the appeal and dispose of it expeditiously through a reasoned and speaking order, preferably within two months from the date of filing along with a copy of the High Court’s order.
  3. The reasoned order shall be communicated to the petitioner.
  4. While considering the appeal or representation, the principles of natural justice shall be followed and due opportunity of hearing shall be afforded to the parties.
  5. The parties shall be granted an opportunity to place all relevant materials and documents on record.
  6. Liberty was reserved to the petitioner to take recourse to alternative remedies otherwise available in accordance with law.
  7. The Court expressed hope that if the petitioner availed remedies available under law before the appropriate forum, the matter would be dealt with in accordance with law and with reasonable dispatch.
  8. Liberty was reserved to the petitioner to approach the appropriate forum or Court should the need subsequently arise on the same or subsequent cause of action.
  9. The High Court expressly clarified that it had not expressed any opinion on the merits of the dispute and that all issues were left open.

Important Clarification

The Patna High Court did not decide whether M/s Kumar Distributors Private Limited was actually entitled to the claimed Input Tax Credit of Rs. 16,98,239.94.

The Court also did not adjudicate the substantive validity of the demand of Rs. 24,67,543 raised through Form GST DRC-07.

The judgment was confined to the legality of rejecting the GST appeal solely on the ground of limitation in circumstances connected with the COVID-19 pandemic period and the applicable directions concerning exclusion of such period for limitation purposes.

Therefore, the legal effect of the judgment is restoration of the petitioner’s opportunity to have the appeal considered on merits. The High Court expressly left all substantive issues open.

Sections and Rules Involved

Section 140 of the Bihar Goods and Services Tax Act, 2017
Relevant to the petitioner’s claim concerning transitional Input Tax Credit.

Section 107 of the Bihar Goods and Services Tax Act, 2017
Relevant to the statutory appellate remedy and the controversy concerning rejection of the appeal on the ground of limitation.

Rule 117 of the Bihar Goods and Services Tax Rules, 2017
Relevant to the procedural framework connected with the transitional credit claim referred to in the proceedings.

Rule 108(3) of the Bihar Goods and Services Tax Rules, 2017
Referred to in connection with the appellate proceedings and the impugned rejection.

Key Legal Takeaway

A GST appeal should not be rejected solely on limitation without properly considering the binding directions governing exclusion of the COVID-19 pandemic period from computation of limitation. Where the rejection is founded exclusively on limitation despite the applicability of pandemic-related limitation protection, the appellate order may be liable to be quashed and the appeal restored for adjudication on merits.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783324085_1223compressed.pdf

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