Joint Commissioner Of State Tax, Large Taxpayer Unit vs. Raj Metal Industries

Held

The Court held that the directions issued by the learned Single Judge were not only in the interest of the writ petitioners but also safeguarded the interest of the revenue. The Court found that the actual adjudication of the dispute had not taken place, which was necessary before passing an order either accepting or denying ITC. The matter was sent back to the appellant authority for verification of documents and correspondences. The Court was of the considered view that no interference was called for with the learned Single Judge's direction. The appeals were dismissed, and the writ petitioners were directed to submit additional documents within two weeks. The concerned authority was to afford a personal hearing, peruse the documents, consider the Single Judge's directions, and proceed on merits expeditiously, preferably within four weeks of the personal hearing. It was clarified that neither the writ court nor the High Court had adjudicated the merits, and all factual and legal issues could be canvassed before the concerned authority.

Facts

The appeals were filed by the Assistant Commissioner of State Tax and the Joint Commissioner of State Tax against a common judgment and order dated December 13, 2021, passed by a learned Single Judge. The writ petitioners, 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 such that input tax credit (ITC) would only be denied in cases of proven collusion or sham transactions. They also sought to quash memos dated August 28, 2019, and November 11, 2019. The State argued that the writ petition was premature, as other petitions challenging the constitutional validity of Section 16(2)(c) were pending. The Single Judge's direction was described as 'innocuous'.

Key Issues

1. Whether the learned Single Judge erred in issuing directions that were not a final adjudication of the dispute, particularly when the constitutional validity of Section 16(2)(c) of the CGST Act/WBGST Act was challenged in other pending writ petitions? (Question of law) Contentions: Petitioner (State): The writ petition was premature because other writ petitions challenging the constitutional validity of Section 16(2)(c) were pending before the learned Single Judge. The impugned direction was an 'innocuous' one, implying it was not a substantive relief. Respondent (Writ Petitioners): The reason for segregating other writ petitions was due to their specific fact situations. The impugned order disposed of these particular writ petitions. The sole reason for denying ITC in these cases was the retrospective cancellation of the selling dealers' registration. The larger relief of a writ of declaration was not granted, and the writ petitioners were not appealing this specific finding.