Facts of the Case

The petitioners, M/s Ladiwal Jewels & Sons LLP and its authorised signatory, challenged an Advisory Memo dated 1st March 2021 issued by the respondent authorities calling upon the petitioner to voluntarily comply with the law, with an assurance of due consideration, in connection with an ongoing investigation into allegedly wrongly availed input tax credit. The memo was stated to have been issued pursuant to a letter dated 19th January 2021 issued by the Commissioner (GST-Inv.), Central Board of Indirect Taxes and Customs.

Issues Involved

  1. Whether the advisory memo, and the CBIC letter under which it was purportedly issued, were without authority and jurisdiction.
  2. Whether such an advisory, without more, amounted to a coercive threat rather than a genuine invitation to voluntary compliance.

Petitioner's Arguments

  • The mode and manner adopted by the respondent authorities was not known to law, as it dispensed with the statutory procedure for determining wrongly availed ITC and instead issued a letter that was, in substance, a threat in the garb of advisory.
  • The office memorandum dated 19th January 2021 under which the advisory was issued was itself without authority and jurisdiction, rendering the advisory equally unauthorised.
  • Reliance was placed on a substantial body of precedent, including M/s Dhariwal Products v. Union of India, Rishi Bansal v. Union of India, Make My Trip (India) Pvt. Ltd. v. Union of India, Bhumi Associate v. Union of India, and Akhil Krishan Maggu v. Dy. Dir., DGGI, among others, to argue that coercive pre-adjudication communications are impermissible.

Respondent's Arguments

  • The petition was founded merely on an apprehension that non-compliance with the advisory would invite coercive action outside due process, which was not the respondents' position.
  • The letters were issued only on a prima facie opinion that the petitioners had availed ineligible ITC; if the petitioners did not voluntarily comply, the authorities would act strictly in accordance with the demand and recovery provisions contained in Chapter XV of the CGST Act, 2017.

Court Order/Findings

  • The Court, without commenting on the merits of whether the petitioners had committed fraud or wrongly availed ITC, held that the advisory itself had triggered the petition.
  • It was not the respondents' stand that the advisory, by itself, would form the basis for recovery.
  • Placing on record the clear stand of the respondents that any demand and recovery would be made only by complying with Chapter XV of the Act, the Court found it unnecessary to go into all the questions raised.
  • The writ petition was disposed of with liberty to the petitioners to raise all defences available to them in law against any future action of demand and recovery.

Important Clarification

  • An advisory or administrative communication urging voluntary reversal of ITC has no independent enforceability and cannot, by itself, be treated as a foundation for recovery.
  • Any demand and recovery of allegedly wrongful ITC must follow the statutory process under Chapter XV, and the assessee's right to contest such action on all available grounds remains fully preserved.

Sections Involved

  • Chapter XV (Sections 73 & 74), CGST Act, 2017 — governs determination and recovery of tax not paid or input tax credit wrongly availed.
  • Article 226, Constitution of India — invoked for the writ jurisdiction of the High Court.

Decision – In Favour of

Disposed of with directions; in effect favouring the Assessee, since no recovery can rest on the advisory alone and all defences against any future demand or recovery action stand expressly preserved, without any adjudication on the merits of the ITC allegation.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Judicature for Rajasthan, Bench at Jaipur
  • Case No.: D.B. Civil Writ Petition No. 3731/2021
  • Coram: Hon'ble the Acting Chief Justice Mr. Manindra Mohan Shrivastava and Hon'ble Mr. Justice Sameer Jain
  • Date of Order: 23rd March 2022

Link to Download the Order

Download the full order

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.