M/S Prime Steel Industries PVT LTD vs. The State Of Hp And Others

Held

The Court noted that the respondent authorities, through a communication dated May 13, 2025, had dropped all proceedings against the petitioner. The authorities were satisfied that the petitioner had complied with all conditions in terms of Section 16(2) of the GST Act related to the supplies mentioned in the notices. Furthermore, the authorities concluded that the petitioner had discharged its duty beyond reasonable doubt in terms of Section 155 of the GST Act. Consequently, the writ petition was rendered infructuous. The Court did not decide on the merits of the initial challenge but disposed of the petition based on the subsequent action of the revenue dropping the proceedings. No specific issue was left undecided, as the matter was resolved by the revenue's decision.

Facts

M/s Prime Steel Industries Pvt. Ltd. (the petitioner) filed a writ petition challenging proceedings initiated by the respondent authorities. These proceedings were based on communications dated April 25, 2025, issued under Rule 142(1A) of the GST Rules, 2017, in Form DRC-01A, for the financial years 2019-2020 to 2024-2025. The petitioner sought to quash these proceedings and any consequential actions. The basis for the initiation of proceedings was the alleged availment of inadmissible Input Tax Credit (ITC) due to non-existent, bogus, cancelled, or otherwise doubtful suppliers. The petitioner had participated in the proceedings, submitted documentary evidence, and filed detailed replies. For FY 2021-22, the petitioner voluntarily deposited Rs. 16,00,832/- and for FY 2022-23, Rs. 6,28,744/- and Rs. 34,92,228/- via DRC-03, along with interest and penalty.

Key Issues

1. Whether the proceedings initiated under Rule 142(1A) of the GST Rules, 2017, for the financial years 2019-2020 to 2024-2025, based on alleged availment of inadmissible ITC due to non-existent/bogus/cancelled suppliers, were validly initiated and pursued. Petitioner's contention: The petitioner argued that they had participated in the proceedings, submitted all necessary documentary evidence to demonstrate the genuineness of their purchases and suppliers, and provided detailed replies, including supplementary ones. They also uploaded soft copies of sample documents and filed physical copies of all relevant documents. Furthermore, they had voluntarily deposited tax, interest, and penalty for specific financial years where issues arose with certain suppliers. Revenue's contention: The communication dated May 13, 2025, placed on record by the Learned Advocate General, indicated that the proceedings were initiated on account of the availment of inadmissible ITC on account of non-existent/bogus/cancelled suo-moto suppliers and any other doubtful suppliers for the respective financial years. However, the subsequent content of the communication revealed that the authorities were satisfied with the petitioner's compliance.