Tara Lohia Private Limited vs. Additional Commissioner, CGST And Cx, Kolkata South Commissionerate And Anr.

Facts

The petitioner, Tara Lohia Private Limited, filed a writ petition challenging an order dated January 29, 2025, issued under Section 74 of the WBGST/CST Act, 2017, concerning the tax period July 2017 to March 2022. The proceeding was initiated based on audit observations under Section 65, leading to a show cause notice dated August 1, 2024. The proposed demand included issues like irregular availment of Input Tax Credit (ITC) due to suppliers not filing GSTR-3B, block credit violations, excess ITC in GSTR-3B compared to GSTR-2A, non-payment of GST on supplies received under Reverse Charge Mechanism (RCM), and non-payment of GST on sundry creditors within 180 days. The petitioner confined its challenge to specific paragraphs of the show cause notice, particularly those concerning the 180-day rule for sundry creditors and ITC availment.

Held

The Court held that the writ petition was not maintainable under Article 226 of the Constitution of India. The Court found that the petitioner was primarily aggrieved by errors committed by the proper officer in considering the materials on record, rather than a jurisdictional error or violation of natural justice. The Court noted that the petitioner had failed to substantiate the factum of payment to sundry creditors within the statutory period of 180 days by disclosing bank statements, and it was the petitioner's obligation to place such documents before the authorities. The Court distinguished the case of Raza Textiles Limited, stating that the facts were distinguishable and did not assist the petitioner, as the present case did not involve an authority conferring jurisdiction upon itself by wrongly deciding a jurisdictional fact. The Court found that the exercise of jurisdiction by the authority was not in question, and the issues raised were errors committed within its jurisdiction, which cannot be entered into in a writ application. The Court also noted that the petitioner had taken a chance by approaching the High Court and that no further statutory challenge would be maintainable as it would amount to a second round before the appellate authority. However, the Court permitted the petitioner to raise any other challenge not presented in the petition before the appellate authority within four weeks, provided it was maintainable in law, and directed the appellate authority to hear and dispose of the appeal expeditiously.

Key Issues

1. Whether the petitioner's challenge to the order under Section 74 of the WBGST/CST Act, 2017, is maintainable before the High Court under Article 226 of the Constitution of India, despite the availability of an alternative remedy of appeal under Section 107. 2. Whether the proper officer erred in law by treating outstanding amounts shown against sundry creditors in the balance sheet/profit and loss account as amounts outstanding beyond 180 days, thereby attracting the second proviso of Section 16(2) of the CGST Act, 2017, without sufficient basis or proper inquiry. 3. Whether the proper officer properly considered the petitioner's clarifications regarding the irregular availment of ITC against invoices for purchases, ineligible credit, and excess ITC in GSTR-3B compared to GSTR-2A/2B. Petitioner's Arguments: - The petitioner argued that the show cause notice and subsequent order were based on irregular assumptions, particularly regarding the 180-day rule for sundry creditors, and that the respondents failed to conduct a proper audit inquiry. They contended that the reflection of sundry creditors in financial statements does not automatically mean payments were delayed beyond 180 days. They also argued that issues related to GSTR-2A/2B and ineligible credit were not properly dealt with, constituting an error of jurisdiction, thus justifying the writ petition. Reliance was placed on Raza Textiles Limited v. Income Tax Officer, Rampur. Revenue's Arguments: - The revenue argued that the petitioner failed to provide necessary documents, such as bank statements, to substantiate payments to sundry creditors within 180 days, and the onus was on the petitioner to provide such proof. They also contended that the petitioner did not disclose supporting documents for availing ITC. The revenue argued that the issues raised were within the competence of the proper officer to adjudicate and that the writ petition was not maintainable due to the availability of an alternative remedy.