Facts of the Case

The petitioner, Vardhman Ispat Udyog, filed a writ petition before the Himachal Pradesh High Court challenging the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 and the corresponding provision under the Himachal Pradesh GST Act. The petitioner also sought quashing of the summary show cause notices dated 17.08.2021, through which tax, interest, and penalty had been demanded.

During the hearing, however, the petitioner chose not to press the constitutional challenge to Section 16(2)(c), while reserving liberty to raise the issue in an appropriate proceeding in future. Instead, the petitioner confined the challenge to the show cause notices on the ground that the authorities had failed to consider the detailed reply and supporting documents already submitted in response to earlier summons and intimation.

Issues Involved

  1. Whether the GST authorities could proceed with the show cause notices without considering the petitioner's detailed reply and supporting documents.
  2. Whether the petitioner's claim for Input Tax Credit (ITC) deserved fresh examination based on documentary evidence.
  3. Whether the competent authority should pass a reasoned and speaking order after considering all relevant objections and documents.
  4. Scope of proceedings relating to Section 16(2)(c) of the CGST Act, 2017, without deciding its constitutional validity.

Petitioner's Arguments

  • The petitioner submitted that after receiving the summons and intimation dated 09.08.2021, a comprehensive reply along with supporting documents had already been furnished claiming entitlement to Input Tax Credit.
  • It was argued that the GST authorities issued the impugned show cause notices without considering the material already placed on record.
  • The petitioner requested that the competent authority be directed to reconsider the matter by examining:
    • Whether GST along with the purchase consideration had actually been paid to the supplier.
    • Whether the transactions and purchases were genuine and supported by valid documents.
    • Whether the purchases were made prior to cancellation of the supplier's GST registration.
    • Whether the petitioner had complied with statutory obligations regarding verification of the supplier.
  • The petitioner further submitted that if these factual aspects were found in its favour, the benefit of Input Tax Credit should be granted.

Respondents' Arguments

The State submitted that if the petitioner files a fresh response along with all relevant supporting documents before the competent authority, the authority would examine the matter and decide the same within a reasonable time in accordance with law.

Court Order / Findings

The Himachal Pradesh High Court disposed of the writ petition with the following directions:

  • The competent authority shall consider the objections and supporting documents that may be filed by the petitioner in response to the show cause notices dated 17.08.2021.
  • The petitioner shall file its objections along with supporting documents within 28 days.
  • The competent authority shall examine the petitioner's submissions and pass a speaking and reasoned order within six weeks from the date of filing of objections.
  • While deciding the matter, the authority shall consider the issues relating to:
    • Actual payment of GST to the supplier.
    • Genuineness of the transactions.
    • Availability of supporting documents.
    • Timing of purchases vis-à-vis cancellation of the supplier's registration.
    • Compliance with statutory verification obligations by the petitioner.
  • If no objections are filed within the prescribed period, the authority shall proceed further in accordance with law.

The Court did not adjudicate upon the constitutional validity of Section 16(2)(c), as the petitioner chose not to press that relief, while reserving liberty to challenge the provision in an appropriate case.

Important Clarification

  • The judgment does not declare Section 16(2)(c) of the CGST Act unconstitutional.
  • The constitutional challenge was expressly not pressed by the petitioner.
  • The High Court confined its decision to ensuring procedural fairness by directing the GST authorities to consider all relevant evidence before deciding the petitioner's entitlement to Input Tax Credit.
  • The judgment reinforces the requirement that GST authorities must pass a reasoned and speaking order after considering the taxpayer's reply and documentary evidence.

Sections Involved

  • Section 16(2)(c), Central Goods and Services Tax Act, 2017
  • Corresponding provision under the Himachal Pradesh Goods and Services Tax Act, 2017
  • Articles 14, 19(1)(g), 21 and 300A of the Constitution of India (raised in the constitutional challenge but not adjudicated)

Link to Download the Order  https://mytaxexpert.co.in/uploads/1784874603_1941compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.