Facts of the Case

The petitioner, Unity OOH Media Solutions Pvt. Ltd., an assessee under the CGST/SGST Act, 2017, had filed GSTR-1 and GSTR-3B returns for July 2017 to March 2018 and claimed input tax credit (ITC) on purchases from registered dealers. Show-cause notices issued through the GST portal went unanswered by the petitioner, who cited initial difficulties in navigating the newly introduced GST regime and lack of portal access. In the absence of a reply and personal hearing, the Deputy State Tax Officer passed Ext.P2 assessment order under Section 73(9), disallowing the ITC claimed in Ext.P1 solely on the ground that certain suppliers had not filed their GSTR-1 before the due date of 30.04.2019.

Issues Involved

  1. Whether ITC can be denied to a genuine claimant solely because the selling dealer failed to file GSTR-1 within time.
  2. Whether the assessment order passed without affording a hearing to the petitioner was sustainable.

Petitioner's Arguments

  • The petitioner had no real opportunity to represent its case since the show-cause notice went unanswered amid early GST-implementation difficulties.
  • Relied on this Court's decision in M/s Henna Medicals v. State Tax Officer, itself following Diya Agencies v. State Tax Officer, where ITC denial for supplier default alone was held unsustainable and remanded for fresh consideration on evidence.

Respondent's Arguments

  • The Department's order reflected that ITC was disallowed strictly because the corresponding GSTR-1 had not been filed by suppliers before the prescribed cut-off date.

Court Order/Findings

  • The Court held that mere non-reflection of tax in GSTR-2A due to a supplier's default is not, by itself, sufficient ground to deny a bona fide claimant's ITC, following the ratio in Diya Agencies.
  • The matter was remitted to the Assessing Authority to reconsider the ITC claim afresh in light of Diya Agencies and after hearing the petitioner.
  • The petitioner was directed to appear before the Assessing Officer on 05.01.2024 with supporting evidence.
  • The writ petition was finally allowed and Ext.P2 was set aside.

Important Clarification

  • ITC cannot be mechanically denied merely because the corresponding purchase does not reflect in GSTR-2A on account of the supplier's failure to file GSTR-1; the assessee must be given a genuine opportunity to prove the underlying transaction.

Sections Involved

  • Section 73(9), CGST/SGST Act, 2017 – determination of tax not paid or ITC wrongly availed for reasons other than fraud.
  • Section 16(4), CGST/SGST Act, 2017 – time limit for availing ITC, invoked here to reject the claim.

Decision – In Favour of

In favour of the Assessee – the assessment order was set aside and the matter remanded with a direction that ITC not be denied for supplier default alone, subject to the petitioner substantiating its claim on remand.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No.42429 of 2023
Coram: Justice Dinesh Kumar Singh
Decision Date: 21-12-2023
Disposal Nature: Allowed; assessment order set aside and remanded

Link to Download the Order

Download the full judgment (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.