Facts of the Case

G.K. Traders sought a direction to the GST authorities to allow input tax credit of Rs. 19,58,652 claimed on raw materials purchased from M/s. M.M. Traders. The Revenue's case was that M/s. M.M. Traders had no legal existence, and that the petitioner's ITC claim was based on a fictitious and fraudulent supplier. The department had issued a Form GSTR-3A notice (Exhibit P2, dated 27.07.2023) and two show cause notices (Exhibits P3 and P4, both dated 13.07.2023, covering April 2022–March 2023 and April–June 2023 respectively). The petitioner had filed replies (Exhibits P5 and P6) on 12.08.2023, but no decision had been taken by the department by the time the writ petition was filed.

Issues Involved

  1. Whether the department should be directed to decide the pending show cause notices concerning the petitioner's disputed input tax credit claim within a fixed time, and whether coercive action should be restrained in the interim.

Petitioner's Arguments

  • The petitioner had already filed detailed replies to the GSTR-3A notice and both show cause notices, but no decision had been taken for a prolonged period, leaving the matter in limbo.

Respondent's Arguments

  • The Government Pleader, on instructions, submitted that a decision on the show cause notices would be taken in accordance with law within ten days.

Court Order / Findings

  • Recording the Government Pleader's submission, the Court directed the petitioner to appear before the second respondent on 11.09.2023 with all necessary papers for adjudication.
  • The Court directed that a decision be taken within the time indicated, with follow-up by both the department and the petitioner, and made clear that no coercive measures were to be taken against the petitioner until a decision was reached.
  • The writ petition was disposed of on these directions.

Important Clarification

The Court made no finding on whether M/s. M.M. Traders was in fact a fictitious entity, or on whether the petitioner's Rs. 19.58 lakh input tax credit claim was genuine — that adjudication was left entirely to the department, subject only to a time-bound decision and interim protection from coercive recovery.

Sections Involved

  • Central Goods and Services Tax Act, 2017 — Section 16 (input tax credit conditions), Section 73/74 (demand provisions)
  • Central Goods and Services Tax Rules, 2017 — Form GSTR-3A, Form GSTR-2B

Decision – In Favour of

Disposed of with a procedural direction favourable to the petitioner (time-bound decision and no coercive action meanwhile); the substantive ITC/fraud dispute remains undecided.

Case Details

Court: High Court of Kerala at Ernakulam  |  Case No.: WP(C) No. 28275 of 2023  |  Coram: Hon'ble Mr. Justice Dinesh Kumar Singh  |  Date: 4 September 2023

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