M/S Shree Krishna Traders vs. State Of U.P. And Another

Held

The Court held that the impugned order dated 26.7.2023 should be set aside. The reasoning was based on the petitioner's submission that the respondent authority had failed to extend the benefit of the circular dated 2.1.2023, which provides a specific procedure for cases where a supplier incorrectly declares the recipient's GSTIN in GSTR-1 but has filed GSTR-3B. The Court accepted the respondent revenue's lack of objection to remitting the matter. The ratio decidendi is that tax authorities must follow their own circulars and established procedures when adjudicating tax disputes, especially concerning input tax credit, and failure to do so warrants a remand. The Court directed that the matter be remitted back to respondent no.2 to pass fresh orders within one month, taking into consideration the aforesaid circular and any other material relied upon by the petitioner.

Facts

The petitioner, M/s Shree Krishna Traders, challenged proceedings initiated under Section 74 of the U.P. GST/CGST Act. The challenge was to a notice dated 24.12.2022 and an order dated 26.7.2023, both pertaining to the financial year 2017-18, specifically the tax period July 2017 to March 2018. The petitioner argued that the respondent authority failed to follow the procedure outlined in a circular dated 2.1.2023, despite mentioning it in the impugned order. The petitioner contended that the benefit of this circular was not extended to them. The respondent revenue did not object to the petitioner's submission.

Key Issues

1. Whether the respondent authority erred in not extending the benefit of the circular dated 2.1.2023 to the petitioner, as required by its provisions, when dealing with input tax credit (ITC) claims where the supplier declared the supply with a wrong GSTIN in GSTR-1 but filed GSTR-3B? The petitioner argued that the circular provides a specific procedure for handling discrepancies where a supplier files both GSTR-1 and GSTR-3B but incorrectly mentions the recipient's GSTIN in GSTR-1. They contended that paragraph 3(d) and paragraph 4 of the circular outline how such cases should be handled, and the authority failed to follow this procedure, thereby denying the petitioner the benefit of the circular. The petitioner sought setting aside of the impugned order and remittance for fresh decision. The respondent revenue stated they had no objection to the proposition that the matter be remitted to the authority concerned for a fresh decision.