Facts of the Case

The petitioner, Tikona Infinet Private Limited (TIPL), engaged in providing internet services across India including Andhra Pradesh, entered into a Business Transfer Agreement dated 17.08.2017 with Tikona Digital Networks (TDN), under which TDN's business was transferred to TIPL as a going concern. TDN intended to transfer its unutilised electronic credit ledger balance to TIPL by filing Form GST ITC-02 under Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules, but the form was not then available on the GST portal; TDN and TIPL separately intimated the authorities of this by letters dated 13.09.2017 and 12.02.2018. Years later, following a scrutiny notice in Form GST ASMT-10 dated 11.04.2023, the Deputy Assistant Commissioner, State Taxes, Visakhapatnam, issued the impugned show cause notice dated 29.09.2023 in Form GST DRC-01, proposing to levy Rs. 31,81,529/- towards excess ITC claimed and a further Rs. 38,46,389/- towards other discrepancies, with interest under Section 50. TIPL challenged the show cause notice itself before the Andhra Pradesh High Court, seeking a declaration that ITC could not be denied merely because the transfer was effected manually rather than electronically.

Issues Involved

  1. Whether a writ petition challenging a mere show cause notice, at the threshold, is maintainable.
  2. Whether ITC transferred manually via Form GST ITC-02, in the absence of the form's availability on the GST portal, can be denied solely for want of electronic filing under Section 18(3) read with Rule 41.

Petitioner's Arguments

  • Since Form GST ITC-02 was not available on the GST portal at the relevant time in 2017, manual filing was the only option, and denying ITC purely on that technical ground would be unjust.
  • Relied on the Allahabad High Court's ruling in the petitioner's own parallel matter, which set aside a similar rejection and remanded for fresh consideration, and on Pacific Industries Ltd. v. Union of India (Rajasthan HC) and K.V. Reddy Granites (AP HC), which excused manual filing on similar technical grounds.
  • Urged the Court to read down Rule 41 to permit manual filing where the electronic facility was unavailable.

Respondent's Arguments

  • The writ petition against a mere show cause notice was premature, relying on Assistant Commissioner of State Tax v. Commercial Steel Limited (SC), which confines writ interference at the SCN stage to breach of fundamental rights, natural justice violations, excess of jurisdiction, or vires challenges, none of which was made out.
  • Whether the portal was actually unavailable at the relevant time, and whether the petitioner had raised the grievance through the prescribed IT Grievance Redressal Mechanism, were disputed questions of fact for the adjudicating authority, not the writ court.

Court Order/Findings

  • The Court held that the factual question of portal non-availability, and the legal consequence of manual filing in such circumstances, are matters the petitioner can and should raise as objections before the authority pursuant to the show cause notice, with supporting evidence and a personal hearing.
  • Distinguished the petitioner's own Allahabad High Court order, which intervened only after a final rejection order had already been passed without considering the petitioner's objections, since here no final order had yet been passed.
  • Relying on Commercial Steel Limited and related Supreme Court precedent, reiterated that writ courts should not ordinarily entertain challenges to a mere show cause notice, and declined to read down Rule 41 at this pre-adjudication stage; the writ petition was dismissed, with one week granted to file objections, to be decided within four weeks.

Important Clarification

A writ petition challenging a GST show cause notice at the threshold - even one raising a genuine grievance about non-availability of a mandatory electronic form like GST ITC-02 - will ordinarily be dismissed as premature; the assessee must first place its factual case, such as portal non-availability and manual filing, before the adjudicating authority with evidence, reserving recourse to the writ court for after an adverse order.

Sections Involved

  • Section 18(3), CGST Act, 2017 - transfer of unutilised ITC on business transfer.
  • Rule 41, CGST Rules, 2017 - procedure for Form GST ITC-02 transfer of credit.
  • Section 50, CGST Act, 2017 - interest on delayed or wrongly availed credit.

Decision – In Favour of

This is a thin, procedural disposal. The writ petition was dismissed at the threshold, favouring the Department procedurally in that the show cause notice was sustained and the petitioner directed to respond to it, but the Court expressed no view on the substantive merits of the ITC-02 manual-filing issue, which remains open before the adjudicating authority.

Related Case Laws

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

Case Details

  • Court: High Court of Andhra Pradesh
  • Case No.: Writ Petition No. 28743 of 2023
  • CNR: Not available
  • Coram: Justice Ravi Nath Tilhari and Justice A V Ravindra Babu
  • Decision Date: 9 November 2023
  • Disposal Nature: Dismissed; petitioner directed to respond to show cause notice

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