FACTS OF THE CASE

  • Background of the Assessee: The petitioner, M/s Corrtech International Private Limited, is a company operating from its local place of business at Maharajganj, Pargana Haveli, Purnea, Bihar.
  • Assessment Order Passed: The Deputy Commissioner of State Taxes, Purnea Circle (Respondent No. 3), passed an ex-parte order on January 25, 2021, under Section 73 of the Central/Bihar Goods and Services Tax Act, 2017, for the tax period April 2020 to June 2020. Concurrently, a summary of the order in Form GST DRC-07 was issued pursuant to Rule 142(5) of the CGST Rules, 2017.
  • Impugned Tax Discrepancy: The underlying issue related to the denial of Input Tax Credit (ITC) on account of a mismatch/discrepancy between the auto-populated Form GSTR-2A and the return filed by the tax assessee in Form GSTR-3B.
  • Rejection of Statutory Appeal: The petitioner preferred an appeal under Section 107 of the CGST/BGST Act, 2017 before the Additional Commissioner of State Taxes (Appeals), Purnea Division. However, vide communication dated July 29, 2021, issued in Form GST APL-02, the appeal was rejected purely on technical grounds of non-production of certified copies of the impugned assessment order.
  • Writ Petition Filed: Aggrieved by both the ex-parte assessment order and the rejection of the statutory appeal on procedural technicalities, the petitioner approached the High Court of Judicature at Patna by filing a Writ Petition (Civil Writ Jurisdiction Case No. 13708 of 2022) under Article 226 of the Constitution of India.

ISSUES INVOLVED

  1. Violation of Natural Justice: Whether an ex-parte assessment order passed under Section 73 of the CGST/BGST Act without granting a fair and reasonable opportunity of hearing or sufficient time can be sustained in the eye of law?
  2. Validity of Non-Speaking Orders: Whether an order passed by tax authorities without recording clear, decipherable reasons or explaining how the tax demand was quantified entails adverse civil consequences and deserves to be quashed?
  3. Arbitrary Rejection of Appeal: Whether the Appellate Authority was justified in rejecting the statutory appeal under Section 107 on technical grounds such as the non-submission of certified copies via Form GST APL-02?
  4. ITC Mismatch (GSTR-2A vs. GSTR-3B): Whether a mere discrepancy or mismatch between the auto-populated Form GSTR-2A and Form GSTR-3B can automatically deprive a taxpayer of their right to avail Input Tax Credit under Section 16 of the CGST Act?

PETITIONER’S ARGUMENTS

  • Quashing of Rejection Order: The petitioner sought a writ of certiorari to quash the communication dated July 29, 2021, issued in Form GST APL-02, whereby the statutory appeal under Section 107 was dismissed on technical grounds of non-production of certified copies.
  • Quashing of Assessment Order & Demand Notice: The petitioner urged the quashing of the non-speaking, ex-parte order dated January 25, 2021, passed under Section 73, along with the corresponding summary order in Form GST DRC-07.
  • Stay on Coercive Recovery: The petitioner prayed for a stay restraining the tax authorities from adopting any coercive steps for the recovery of tax, interest, or penalty during the pendency of the writ petition.
  • Substantive Claim on Input Tax Credit (ITC):
    • The petitioner contended that the mere absence of auto-populated details in Form GSTR-2A leading to a mismatch with Form GSTR-3B cannot automatically disentitle a registered taxpayer from availing Input Tax Credit.
    • The petitioner argued that Section 16(2) read with Rule 36 of the CGST Rules, 2017 does not compel a taxpayer to restrict the availment of ITC exclusively to the month in which the purchase occurs.
    • Furthermore, Section 16(4) explicitly permits taxpayers to avail and utilize ITC pertaining to a past financial year up to the due date of filing the return for the month of September following the end of the relevant financial year.

RESPONDENT’S ARGUMENTS

  • No Objection to Remand: The learned counsel appearing for the Revenue conceded during the hearing that he had no objection if the matter was remanded back to the Assessing Authority to be re-decided afresh on its merits.
  • Waiver of Limitation and Interim Protection: Revenue's counsel assured that the plea of limitation would not be raised as a barrier upon remand and agreed that no coercive recovery steps would be taken against the petitioner while the matter remained pending before the assessing officer.

COURT ORDER / FINDINGS

The Division Bench comprising Hon’ble the Chief Justice Mr. Sanjay Karol and Hon’ble Mr. Justice S. Kumar passed the judgment on October 12, 2022, laying down key findings:

  • Interference via Writ Jurisdiction: The High Court observed that despite the availability of an alternative statutory remedy, the High Court under Article 226 is not precluded from interfering where, ex-facie, the order passed by the revenue authority is bad in law.
  • Triple Violations Identified by the Court:
    1. Violation of Natural Justice: Sufficient time and fair opportunity of hearing were not provided to the petitioner to present their case.
    2. Absence of Decipherable Reasons: The ex-parte order failed to assign sufficient or logical reasons to demonstrate how the officer determined the tax liability.
    3. Failure to Adjudicate Material Facts: The authorities failed to adjudicate the factual and legal submissions raised, which is mandatory even in ex-parte proceedings.
  • Specific Directions Passed by the Court:
    1. Quashing of Orders: The High Court quashed and set aside the rejection order in Form GST APL-02 dated July 29, 2021, the ex-parte assessment order dated January 25, 2021, and the summary demand notice in Form GST DRC-07.
    2. Pre-deposit Requirements: The Court recorded the petitioner's undertaking to pre-deposit a total of 20% of the demand amount (10% already deposited for the appeal and an additional 10% to be deposited within 4 weeks).
    3. De-freezing of Bank Accounts: The Court directed immediate de-freezing/de-attaching of any bank accounts attached during the proceedings.
    4. No Coercive Action & Remand: The matter was remanded to the Assessing Officer for a fresh, speaking order on merits within two months after granting full opportunity of hearing. No coercive action can be taken during this pendency.

IMPORTANT CLARIFICATION

  • Adjudication on Merits Kept Open: The High Court clarified that it has not expressed any final opinion on the substantive merits of the legal arguments regarding GSTR-2A vs GSTR-3B mismatch and Section 16(4) provisions, leaving all issues open for fresh adjudication by the Assessing Officer.
  • Duty to Pass Speaking Order: Ex-parte orders passed by statutory tax officers must be grounded in logical reasoning, and tax liability cannot be determined arbitrarily without adhering to natural justice.

SECTIONS INVOLVED

  • Section 73 of the CGST / BGST Act, 2017: Determination of tax not paid, short paid, or erroneously refunded, or input tax credit wrongly availed or utilized.
  • Section 107 of the CGST / BGST Act, 2017: Appeals to Appellate Authority.
  • Section 16, Section 16(2), Section 16(4) of the CGST Act, 2017: Eligibility, conditions, and timelines for claiming Input Tax Credit (ITC).
  • Rule 142(5) of the CGST Rules, 2017: Issuance of summary of order in Form GST DRC-07.
  • Rule 36 of the CGST Rules, 2017: Documentary requirements and conditions for claiming ITC.

Link to download the order - https://mytaxexpert.co.in/uploads/1784614970_1551compressed.pdf

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