Hanuman Industrial Corporation Through Its Proprietor Prashant Bansal vs. Govt Of Nct Of Delhi Through Chief Secretary & Ors.

Facts

The petitioner, Hanuman Industrial Corporation, challenged an order dated April 20, 2024, passed by the Adjudicating Authority under Section 73 of the CGST Act/DGST Act. This order confirmed a demand of ₹46,27,512/- for excess Input Tax Credit (ITC) utilization, along with interest and penalty. The demand arose from a Show Cause Notice (SCN) dated December 24, 2023, which alleged that the petitioner availed ITC from suppliers who had not paid tax on their outward supplies. The SCN mentioned that the registrations of two such taxpayers were cancelled retrospectively. The petitioner contended that they had received supplies, paid the suppliers, and the GST portal indicated the suppliers had paid taxes at the material time. The impugned order, however, mechanically confirmed the liability without specific findings on whether the suppliers had discharged their tax obligations.

Held

The Court held that the impugned order failed to make a specific finding that the suppliers, from whom the petitioner had availed supplies, had not discharged their tax liability by depositing tax with the Government, either in cash or by utilizing admissible ITC, as stipulated by Section 16(2)(c) of the CGST Act. The Court noted that the plain language of Section 16(2)(c) requires tax to be actually paid to the government. The Adjudicating Authority had mechanically confirmed the liability without addressing the petitioner's contention that they had paid the suppliers and the GST portal reflected tax payment. In light of the revenue's submission for remand, the Court set aside the impugned order and remanded the matter to the Adjudicating Authority for a fresh decision after affording the petitioner an opportunity of hearing. The Adjudicating Authority was directed to decide the matter expeditiously, preferably within eight weeks.

Key Issues

1. Whether the Adjudicating Authority erred in confirming the demand for excess ITC utilization without a specific finding that the suppliers from whom the petitioner availed supplies had not discharged their tax liability as required under Section 16(2)(c) of the CGST Act? Petitioner's arguments: The petitioner argued that they had received supplies, paid the suppliers in full, and the GST portal showed the suppliers as compliant at the relevant time. They contended that the impugned order failed to consider these submissions and mechanically confirmed the demand without establishing the non-payment of tax by the suppliers. Revenue's arguments: The respondent revenue authorities, through their counsel, submitted that the matter should be remanded to the Adjudicating Authority for fresh consideration.