Assistant Commissioner Of State Tax, ITC vs. Lgw Industries Limited

Held

The Court held that the directions issued by the learned Single Judge were in the interest of both the respondents/writ petitioners and the revenue. The Court found that the actual adjudication of the dispute, which is necessary before an order accepting or denying ITC can be passed, had not taken place. The learned Single Judge's direction to send the matter back to the appellant authority for verification of documents and correspondences was considered appropriate. Therefore, the Court found no reason to interfere with the learned Single Judge's direction. The appeals were dismissed, and the respondents/writ petitioners were directed to submit additional documents to the concerned authority within two weeks. The authority was directed to provide a personal hearing and conclude the proceedings expeditiously, preferably within four weeks of the personal hearing. The Court clarified that neither the writ court nor the High Court had adjudicated the merits of the case, and all factual and legal issues could be canvassed before the concerned authority.

Facts

The appellants, Assistant Commissioner of State Tax and Joint Commissioner of State Tax, filed intra-court appeals against a common judgment and order dated December 13, 2021, passed by a learned Single Judge. The respondents, LGW Industries Limited and Raj Metal Industries, had sought a declaration that Section 16(2)(c) of the CGST Act/WBGST Act was unconstitutional, or alternatively, to interpret the provision to mean input tax credit (ITC) would only be denied for collusive or sham transactions. They also sought to quash memos dated August 28, 2019, and November 11, 2019. The learned Single Judge issued what the High Court described as an "innocuous direction." The State argued the writ petition was premature and other petitions challenging the constitutional validity of Section 16(2)(c) were pending. The respondents contended that their cases were segregated due to factual differences and that ITC was denied solely because selling dealers' registrations were cancelled retrospectively.

Key Issues

1. Whether the learned Single Judge erred in issuing an "innocuous direction" instead of adjudicating the constitutional validity of Section 16(2)(c) of the CGST Act/WBGST Act or interpreting it as sought by the petitioners? Contentions: Petitioner (State): The writ petition was premature as other writ petitions challenging the constitutional validity of Section 16(2)(c) were pending before the learned Single Judge. The direction issued by the learned Single Judge was not an adjudication of the dispute. Respondent (Writ Petitioners): The reason for segregating other writ petitions was the factual matrix of those cases. The impugned order was passed in their specific cases where the sole reason for denying ITC was the retrospective cancellation of selling dealers' registrations. They did not appeal against the learned Single Judge's refusal to grant the larger relief of declaring Section 16(2)(c) unconstitutional.