Ms Astha Ferrotech Private Limited Through Its Director Sri Satish Kumar Chaudhary vs. The State Of Jharkhand
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The petitioner, M/s Astha Ferrotech Private Limited, filed a writ petition challenging two demand notices issued by the Deputy Commissioner, State Taxes (respondent no.3) under Rule 86A(1)(a)(i) and later Rule 86A(1)(b) of the Jharkhand Goods and Service Tax Rules, 2017. These notices demanded reversal of Input Tax Credit (ITC) amounting to Rs. 21,38,760/- and Rs. 2,79,720/-, plus interest, due to the alleged non-filing of GSTR-3B by its vendor, Karthik Alloys Limited (respondent no.4). The petitioner argued that the transactions occurred before Rule 86A was amended and that the notices were issued without proper application of mind. The petitioner also stated that a proceeding under Section 73(1) of the JGST Act had been initiated against it and was pending. The revised demand notices were assailed through an interlocutory application.
Held
The Court held that the petitioner should not agitate the issue on merits in the writ proceedings, given that proceedings under Section 73 of the JGST Act have already been initiated against the petitioner by the Deputy Commissioner of State Taxes. The Court was of the view that it would not be proper for the Writ Court to enter into the merits of the controversy at this stage. The petitioner was directed to appear before the Deputy Commissioner of State Taxes on 8th February 2021 and produce all relevant documents, invoices, and records for proper adjudication. The Deputy Commissioner was directed to endeavor to conclude the proceedings preferably within a period of 12 weeks. The interlocutory application seeking amendment was allowed and directed to form part of the record. The writ petition was disposed of.
Key Issues
1. Whether the demand notices issued under Rule 86A(1)(a)(i) and Rule 86A(1)(b) of the Jharkhand Goods and Service Tax Rules, 2017, are sustainable when the transactions between the petitioner and its vendor occurred prior to the amendment introducing Rule 86A? 2. Whether the petitioner should be compelled to reverse ITC based on the vendor's alleged non-compliance, despite the petitioner having evidence of invoices and payments? 3. Whether the writ petition is maintainable at this stage, given that a proceeding under Section 73(1) of the JGST Act has already been initiated against the petitioner? Petitioner's contentions: The notices were issued without proper application of mind. The initial notice under Rule 86A(1)(a)(i) was based on the vendor being a 'non-existent dealer', and the revised notice under Rule 86A(1)(b) was based on the vendor being a GSTR-3B return defaulter. The transactions predated the amendment of Rule 86A. Instead of proceeding against the vendor, the petitioner is being asked to reverse ITC. Revenue's contentions: The State argued that since a proceeding under Section 73 of the JGST Act has been initiated against the petitioner, the petitioner should appear before the assessing authority and present all relevant documents rather than pursuing the writ petition.
Sections Cited
Rule 86A(1)(a)(i), Rule 86A(1)(b), Section 50, Section 73(1), Rule 142(1A)
AI-generated summary — verify with the full judgment below
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(T) No. 2996 of 2020
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M/s Astha Ferrotech Private Limited, Jamshedpur. --- --- Petitioner
Versus
The State of Jharkhand
The Commissioner, State Goods & Service Tax, Ranchi.
The Deputy Commissioner of State Taxes, Adityapur Circle, Jamshedpur.
Karthik Alloys Limited, Goa. -- --- Respondents
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CORAM: The Hon’ble Mr. Justice Aparesh Kumar Singh The Hon’ble Mrs. Justice Anubha Rawat Choudhary
Through Video Conferencing
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For the Petitioner : Mr. Nitin Kr. Pasari, Adv.
For the State
: Mr. Piyush Chitresh, A.C. to A.G.
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06/01.02.2021 Heard learned counsel for the petitioner Mr. Nitin Kr. Pasari and Mr. Piyush Chitresh, A.C. to learned A.G..
Writ petitioner approached this Court on blocking of its electronic credit ledger due to non-filing of GSTR-3B by its vendor (respondent no.4) though GSTR-I was filed by him. Two demand notices (Annexure-5 series) bearing nos.39 and 40 of the same date i.e. 5th August 2020 were issued by the Deputy Commissioner, State Taxes (respondent no.3). The instant notices were issued under Rule 86A(1)(a)(i) of the Jharkhand Goods and Service Tax Rules, 2017 as according to the respondent no.3, ITC availed by the petitioner was ineligible. Petitioner was asked to reverse the ITC equivalent to Rs.21,38,760/- and Rs.2,79,720/- with interest computed under Section 50 of the JGST Act, 2017 respectively thereupon by 17th August 2020. During pendency of the writ application, the demands were revised as also stated at para-6 of the counter affidavit dated 27th November 2020. These two revised demand notices bearing no.458 and 459 dated 14th October 2020 have been assailed through I.A. No.6036/2020 by the petitioner. A counter affidavit to the instant I.A. has also been filed by the respondents.
In substance, the case of the petitioner is that these notices have been issued without proper application of mind. The first notice was issued under Rule 86A(1)(a)(i) on the foundational basis that respondent no.4 was shown as ‘non-existent dealer’. The revised notice has been issued under Rule 86A(1)(b) on the basis that the respondent no.4 is a GSTR-3B
-2- return defaulter. It is further case of the petitioner that transaction between the petitioner and the respondent no.4 were over by 2nd May 2019 whereas Rule 86A has been brought by way of an amendment w.e.f. 1st January 2020 vide notification dated 26th December 2019 (Annexure-4). Under the revised notice the demand has been reduced since the tax dues have been partially deposited through the interim resolution professional. Petitioner has shown evidence of invoice and payment details, but instead of proceeding against the vendor (respondent no.4), the impugned notices have been issued for reversal of ITC against the petitioner. However, learned counsel for the petitioner does not dispute that a proceeding under Section 73(1) of the JGST Act read with Rule 142(1A) of the JGST Rules 2017 has been initiated against the petitioner and is presently pending before the respondent no.
Though arguments have been made on merits as well by the learned counsel for the petitioner, but learned counsel for the State submits that since a proceeding under Section 73 of the JGST Act has been initiated against the petitioner, he should appear and place all the relevant documents, invoices, etc. before the respondent no.3 Deputy Commissioner of State Taxes, Adityapur Circle, Jamshedpur instead of pursuing the writ petition at this stage.
Learned counsel for the petitioner is not in a position to dispute that since the proceedings have already been initiated under Section 73 of the Act of 2017 by the respondent no.3, the issue at hand should not be agitated on merits in the writ proceedings.
Having regard to the aforesaid facts and circumstances, this Court is also of the view that the petitioner should subject himself to the proceedings initiated under Section 73 of the JGST Act before the respondent no.3 Deputy Commissioner of State Taxes, Adityapur Circle, Jamshedpur and produce all relevant documents, invoices, records, etc. for proper adjudication thereupon. It would not be proper for the Writ Court to enter into the merits of the controversy at this stage in such circumstances. Petitioner should appear before the respondent no.3 on 8th February 2021. Respondent no.3 would endeavour to conclude the proceedings preferably within a period of 12 weeks
-3- thereof. Writ petition stands disposed of. I.A. No. 6036 of 2020 seeking amendment is allowed. Let it form part of the record.
(Aparesh Kumar Singh, J.)
(Anubha Rawat Choudhary, 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.