Ms Vinayak Metal And Chemicals Through Its Sole Proprietor Namely Mr Sunil Kumar Agarwal vs. Union Of INDIA Through The Commissioner Central Goods And Services Tax
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The petitioner, M/s Vinayak Metal and Chemicals, approached the Jharkhand High Court seeking to unblock its electronic credit ledger, which had been blocked due to allegations of claiming Input Tax Credit (ITC) from a non-existent dealer. The petitioner also challenged an order dated September 15, 2020, passed under Section 73(9) of the JGST Act, which levied tax, interest, and penalty amounting to Rs. 10,64,707.58 for the financial year 2017-18, and a summary of the order issued in Form GST DRC-07 dated September 18, 2020. The petitioner contended that the proceedings were not in accordance with the prescribed procedure, lacking an opportunity for reply or personal hearing. During the pendency of the writ petition, the entire disputed amount was recovered from the petitioner's electronic credit ledger, and the ledger was subsequently unblocked.
Held
The Court noted that the petitioner's electronic credit ledger had been unblocked, although the entire tax amount with interest and penalty had been recovered from it. The Court acknowledged that the petitioner has an alternative remedy of appeal under Section 107 of the JGST Act, 2017. Therefore, the petitioner is entitled to raise all its pleas before the appellate authority, including the fact that the entire tax amount has been recovered from its electronic credit ledger. The Court directed that the appellate authority shall consider all pleas raised by the petitioner and the rulings cited by them while arriving at a considered decision in accordance with law within a specified timeframe. The Court explicitly stated that it had not made any comments on the merits of the case. The appellate authority was also instructed to consider the question of delay sympathetically due to the pendency of the writ proceedings before the High Court. The writ petition was disposed of with these directions.
Key Issues
1. Whether the proceedings initiated under Section 73(1) of the JGST Act for levying tax, interest, and penalty were conducted in accordance with the prescribed procedure, including granting the petitioner an opportunity to furnish a reply and for a personal hearing, as required by law? 2. Whether the petitioner is entitled to challenge the order levying tax, interest, and penalty before the appellate authority under Section 107 of the JGST Act, considering that the entire disputed amount has been recovered from its electronic credit ledger and the ledger has been unblocked? Petitioner's arguments: The petitioner argued that the proceedings were not in accordance with law and the prescribed procedure under the JGST Act, as no opportunity to furnish a reply or attend a personal hearing was granted. They relied on this Court's judgments in M/s Nkas Services Private Limited Vs. The State of Jharkhand & Ors. (W.P.(T) No.2444 of 2021), M/s Tarapore & Company, Jamshedpur Vs. The State of Jharkhand & Ors. (W.P.(T) No.773 of 2018), and Mahadeo Construction Co. Vs. Union of India & Ors. (W.P.(T) No.3517 of 2019), particularly the principle that proper proceedings under Section 73 are required before levying interest. They also contended that the supplier was duly registered and filing returns, and the allegation of the supplier being non-existent was incorrect. The petitioner further submitted that the entire amount had been recovered and the ledger unblocked during the writ proceedings. Revenue's arguments: The State submitted that the petitioner's GSTR-I showed it benefited from ITC forwarded by the alleged non-existent dealer, M/s Sri Sai Enterprises, and that details of invoices were provided in Form GST DRC-01. Since the proceedings were concluded, the State argued that the petitioner should avail the alternative remedy of appeal under Section 107 of the Act, where all pleas could be raised.
Sections Cited
Section 73, Section 73(1), Section 73(9), Section 107
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(T) No. 2973 of 2020 M/s Vinayak Metal and Chemicals.
...... ....... Petitioner
Versus
Union of India through the Commissioner, Central Goods & Services Tax, Ranchi.
The State of Jharkhand through the Commissioner, State Goods & Services Tax, Ranchi.
The State Taxes Officer, Bokaro Circle, Bokaro.
M/s Sri Sai Enterprises, Ranchi.
...... ....... Respondents
--- CORAM: Hon’ble Mr. Justice Aparesh Kumar Singh
Hon’ble Mr. Justice Deepak Roshan
--- For the Petitioner : Mr. Nitin Kr. Pasari, Adv.
Ms. Sidhi Jalan, Adv.
For the State
: Mr. Salona Mittal, A.C. to G.A.-1 For the CGST
: Mr. P.A.S. Pati, Adv.
Mrs. Ranjana Mukherjee, Adv.
--- 07/05.07.2022 Petitioner approached this Court with a prayer to unlock its electronic credit ledger which had been blocked on the purported allegation of having claimed ITC from a non-existent dealer. Petitioner also assailed the order under Section 73(9) of the JGST Act dated 15th September 2020 bearing reference no.206 (Annexure-10) wherein a proceeding under Section 73(1) of the Act relating to financial year 2017-18, tax, interest and penalty to the tune of Rs.10,64,707.58 had been levied. Petitioner also assailed the summary of the order issued in the Form of GST DRC-07 dated 18th September 2020. According to learned counsel for the petitioner, the impugned proceedings are not in accordance with law and the procedure prescribed under the JGST Act. No opportunity to furnish reply or personal hearing was granted to the petitioner. Petitioner relies upon the judgment dated 06.10.2021 rendered by this Court in W.P.(T) No.2444 of 2021 (M/s Nkas Services Private Limited Vs. The State of Jharkhand & Ors.) and also dated 17.12.2019 in W.P.(T) No.773 of 2018 (M/s Tarapore & Company, Jamshedpur Vs. The State of Jharkhand & Ors.). Petitioner has also relied upon the judgment of this Court dated 21.04.2020 rendered in the case of Mahadeo Construction Co. Vs. Union of India & Ors. [W.P.(T) No.3517 of 2019] (Annexure-14) as per which in case the liability of interest is disputed, proper proceedings under Section 73 of the Act is to be conducted before levying interest. Learned counsel for the petitioner submits that the entire proceedings have been initiated based on the allegation that the ITC availed by the petitioner was in respect of transaction by a supplier who was non-
-2- existent. However, the said supplier was duly registered under the CGST Act since 1st July 2017 and had been regularly filing its returns. It is submitted that during pendency of the writ application the entire amount of tax, interest and penalty has been recovered from the electronic credit ledger of the petitioner. He also submits that the electronic credit ledger of the petitioner has since been unblocked.
Learned counsel for the State submits that the petitioner’s GSTR-I showed that it is beneficiary of ITC as per forwarded ITC by the non- existent dealer M/s Sri Sai Enterprises. Details of invoices have also been intimated to the petitioner in Form GST DRC-01. Since the proceedings have already been concluded, the petitioner may be directed to avail the alternative remedy of appeal under Section 107 of the Act of 2017 where all such pleas can be raised.
We have considered the submissions of learned counsel for the parties and the materials placed from records including the provisions of law and the judgments cited by the learned counsel for the petitioner.
It appears that the electronic credit ledger of the petitioner has been unblocked, though recovery of the entire tax amount with interest and penalty has been made from the electronic credit ledger. Petitioner has an alternative remedy of appeal under Section 107 of the JGST Act, 2017. As such, petitioner is entitled to take all such plea before the appellate authority and also show that the entire tax amount has been recovered from its electronic credit ledger. Needless to say, the appellate authority shall consider all the plea raised by the petitioner and the rulings on the subject cited by them while arriving at a considered decision in accordance with law within a time frame.
Writ petition is accordingly disposed of with the aforesaid liberty. Let it be made clear that we have not made any comments on the merits of the case. Needless to say, the appellate authority would consider the question of delay sympathetically in view of the pendency of the instant proceedings before this Court.
(Aparesh Kumar Singh, J)
(Deepak Roshan, J) Shamim/
Reproduced from the public record of the Jharkhand High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.