Abhishek Jaiswal And Anr. vs. Deputy Commissioner Of State Tax And Ors.

Held

The Court found that the petitioners had made out a prima facie case warranting interference. It held that the order of rejection dated 22.11.2024 passed by respondent no. 1 was palpably wrong, suffered from legal infirmity and irregularity, and was perverse in nature. The Court concluded that the order was not sustainable in the eye of law and was liable to be quashed and set aside. The Court explicitly stated that it was disposing of the writ petition without going into the merits of the case. The operative directions included quashing the impugned order, directing the petitioners to submit a comprehensive and detailed reply with all relevant documents, including proof of their status as manufacturers and details of their business, within two weeks to respondent no. 2. Respondent no. 2 was directed to consider and dispose of the reply within two weeks of receipt, after affording all opportunities of hearing and passing a reasoned order in accordance with law.

Facts

The petitioners, Abhishek Jaiswal & Anr., challenged an order dated 22.11.2024 passed by the Deputy Commissioner of State Tax, Refund Processing Officer, Howrah Charge/Circle (respondent no. 1). This order rejected their application for a refund of unutilized excess Input Tax Credit (ITC) amounting to Rs. 19,21,153/- for the period April 2023 to September 2023. The rejection was based on the ground of an inverted duty structure, with the authority contending the petitioners were engaged in trading and not manufacturing. The petitioners claimed to be manufacturers of hand pumps and hand tanks, taxed at 5%, while their inputs were taxed at 8%, leading to accumulated excess ITC. They argued that they had duly replied to show-cause notices and submitted supporting documents, and that similar refunds had been granted for prior periods. The revenue contended that the petitioners had wrongfully claimed ITC and that their status as Registered Taxable Persons (RTP) engaged in trading made them ineligible for refund under the inverted duty structure. The revenue also questioned whether payment to suppliers within 180 days had been proven.

Key Issues

1. Whether the order dated 22.11.2024 rejecting the refund application for unutilized excess ITC of Rs. 19,21,153/- for April 2023-September 2023, on the ground of inverted duty structure, is legally sustainable, considering the petitioners claim to be manufacturers (Section 54(3) of the CGST/WBGST Act, 2017)? The petitioners argued that the rejection order was arbitrary, lacked proper application of mind, and was passed without jurisdiction. They asserted that they are manufacturers and had submitted all necessary documents and replies to show-cause notices, and that refunds for prior periods had been granted. They contended that the allegation of not uploading documents was baseless. The respondent/revenue argued that the petitioners were engaged in trading, not manufacturing, as evidenced by their purchase of goods at 5% pertaining to HSN 8413, which were declared as ‘manufactured goods’ in their reply. They further argued that a registered taxable person engaged in trading is not eligible for refund of unutilized ITC under an inverted duty structure. Additionally, the revenue questioned whether the petitioners had proven payment to suppliers within 180 days as mandated by Section 16(2)(b) of the CGST Act, 2017.