Shyama Power INDIA LTD vs. State Of Hp And Others

Held

The Court held that the order passed by Respondent No. 4 under Section 74 of the HP GST Act, 2017, levying interest and penalty, was unsustainable and perverse. The Court found that the petitioner's deposit of Rs. 1,11,45,134/- on 31.03.2023 was made 'under protest,' which, as per Black's Law Dictionary, means payment is made unwillingly while reserving the right to dispute the validity of the tax. Therefore, this deposit could not be considered an admission of liability. The adjudicating authority (Respondent No. 4) erred by failing to conduct an independent inquiry and by solely relying on the summary of the show cause notice to treat the reversed ITC as an admitted liability. The Court quashed the impugned order dated 02.12.2023, including the interest of Rs. 1,32,34,923/- and penalty of Rs. 1,11,45,134/-. Respondent No. 4 was directed to issue a fresh DRC-07 incorporating only the disputed amount of tax of Rs. 1,11,45,134/-, allowing the petitioner to file an appeal before the Appellate Authority. The ratio is that a payment made under protest cannot be treated as an admission of liability, and an adjudicating authority must conduct an independent inquiry before determining tax, interest, and penalty.

Facts

The petitioner, Shyama Power India Ltd., filed a writ petition challenging an order dated 02.12.2023 passed by Respondent No. 4 (Commissioner, State Taxes and Excise) under Section 74 of the HP GST Act, 2017. This order levied interest of Rs. 1,32,34,923/- and penalty of Rs. 1,11,45,134/-. The petitioner sought to quash this order and have a fresh DRC-07 issued for the disputed tax amount of Rs. 1,11,45,134/- to enable an appeal. The dispute arose from an audit for the years 2017-18 and 2018-19, which identified alleged wrong availment of Input Tax Credit (ITC) to the tune of Rs. 1.11 crores. Despite the petitioner submitting replies and evidence, including affidavits of transporters, and later reversing the ITC under protest on 31.03.2023, Respondent No. 4 treated this reversal as an admission of liability.

Key Issues

1. Whether the order passed by Respondent No. 4 under Section 74 of the HP GST Act, 2017, levying interest and penalty, is liable to be quashed, considering the petitioner deposited the disputed amount under protest? (Question of law) 2. Whether Respondent No. 4 erred in treating the ITC reversed under protest as an admitted liability, thereby precluding the petitioner from availing its statutory remedy of appeal against the basic tax demand? (Question of mixed law and fact) Petitioner's Arguments: The petitioner argued that the deposit made under protest on 31.03.2023 could not be construed as an admission of liability. They relied on the definition of 'under protest' from Black's Law Dictionary, emphasizing that it signifies a reservation of the right to recover the amount later. The petitioner contended that Respondent No. 4 failed to conduct an independent investigation and erroneously based the decision solely on the summary of the show cause notice, treating the reversed ITC as an admitted liability. They also argued that the portal did not allow them to challenge the basic demand of Rs. 1,11,45,134/-, hindering their ability to file a first appeal. Revenue's Arguments: The judgment records no specific arguments presented by the respondents. However, their actions, as described in the facts, indicate they treated the reversed ITC as an admitted liability and proceeded to levy interest and penalty.