M/S Sawhney Handloom vs. CGST Delhi East Commissionerate & Anr.

Held

The Court acknowledged the Petitioner's argument regarding the retrospective effect of Section 16(5) of the CGST Act, 2017, and the potential entitlement to ITC. However, it also noted the Petitioner's failure to respond to the Show Cause Notice, attend personal hearings, and the delay in filing the writ petition. The Court found the Petitioner to be recalcitrant in dealing with the SCN. Despite this, considering the amendment to Section 16(5) and the possibility of the Petitioner being entitled to some benefit, the Court decided to permit the Petitioner to file a rectification application under Section 161 of the CGST Act by January 15, 2026. The Court directed that if filed by this date, the application shall not be dismissed on grounds of limitation and must be adjudicated on merits. The Petitioner is to detail their claim under Section 16(5) in the application, and the Department is to pass a reasoned order, granting a personal hearing. The rectification order is to be passed within two months.

Facts

The Petitioner, M/s Sawhney Handloom, filed a writ petition challenging an Order-in-Original dated April 8, 2024, passed by the Adjudicating Authority. This order confirmed a tax demand of Rs. 74,824/- and imposed a penalty of Rs. 10,000/-. The Petitioner's GST registration had been cancelled on May 19, 2022. Subsequently, a Show Cause Notice (SCN) dated December 11, 2023, was issued, which the Petitioner claims not to have received. The impugned order was passed without the Petitioner filing a reply to the SCN or attending any personal hearing, and the challenge to the order was filed approximately 18 months after its passing.

Key Issues

1. Whether the Petitioner is entitled to claim Input Tax Credit (ITC) for financial years 2017-18, 2018-19, 2019-20, and 2020-21, in light of the retrospective amendment to Section 16(5) of the CGST Act, 2017, which allows such claims if returns were filed prior to November 30, 2021? (Question of law) Petitioner's contention: The Petitioner argued that Section 16(5) of the CGST Act has retrospective effect, entitling them to claim ITC for the specified financial years, and therefore, the impugned order, which did not consider this provision, should not sustain. Revenue's contention: The Respondent submitted that while a mechanism for availing ITC after the retrospective amendment was put in place, the Petitioner did not utilize it. They also noted that the Petitioner failed to file a reply to the SCN, despite it allegedly being served via email, and did not attend any personal hearing. The Respondent argued that the Petitioner was recalcitrant in responding to the SCN and the subsequent order.