Chaudhary Agency vs. State Of Bihar

Held

The Court found substance in the petitioner's submission that relegating the matter to the Appellate Tribunal would be a futile exercise. The issue was confined to the claim of ITC under the IGST head for April, May, and July 2018, amounting to Rs. 7,95,574.91, which was not available in GSTR-2A but was claimed in GSTR-3B. The petitioner argued that the total ITC available under CGST and SGST in GSTR-2A was Rs. 26,54,010.78, and if the disputed amount was adjusted against CGST/SGST liabilities, the demand would be revenue neutral. The Court acknowledged that the petitioner had not taken corrective measures within the stipulated period. However, exercising powers under Article 226, the Court set aside the impugned orders and remanded the matter back to the Assistant Commissioner of State Tax. The authority was directed to ascertain if the rectification of the clerical or arithmetical error in GSTR-3B for the relevant months was revenue neutral. If found to be revenue neutral, the petitioner would be allowed to rectify its GSTR-3B returns upon submission of a manual application, and a fresh order would be passed accordingly within two months. The Court noted that the petitioner's claim of ITC under IGST was due to an error in reflecting CGST/SGST ITC, and if corrected, it would be revenue neutral.

Facts

Chaudhary Agency, a proprietorship concern, filed a writ petition challenging an order dated 04.09.2024 by the Additional Commissioner of State Tax (Appeals) which rejected its appeal on merit. The petitioner also challenged an order dated 21.02.2024 by the Assistant Commissioner of State Tax, demanding tax, interest, and penalty for the period 2018-19. The petitioner claimed input tax credit (ITC) based on invoices, which were not reflected in GSTR-2A. In some instances, ITC reflected in GSTR-2A was not claimed in monthly returns but accumulated and claimed later. The petitioner admitted to erroneously claiming CGST and SGST ITC under the IGST head in GSTR-3B returns, despite no IGST supplies being made. A show cause notice was issued, and the petitioner explained that the ITC was adjustable against CGST and SGST liabilities, making the demand revenue neutral. However, the authorities proceeded to raise the demand.

Key Issues

1. Whether the petitioner's claim of Input Tax Credit (ITC) under the IGST head, which was erroneously reflected in GSTR-3B instead of CGST/SGST, despite no IGST supplies, can be rectified to offset CGST/SGST liabilities, rendering the demand revenue neutral, as argued by the petitioner, relying on Section 49(5) of the Act, Rule 88A, and Circular No. 98/17/2019/GST, and Supreme Court's decision in CBIC vs. Aberdare Technologies Private Limited and Patna High Court's decision in Om Traders vs. Union of India? 2. Whether the revenue's contention that the petitioner failed to reverse excess ITC or pay the due amount, and that the claim was in violation of Section 16(2) of the CGST/BGST Act, and that the petitioner is a habitual defaulter, is valid, thereby justifying the rejection of the appeal and dismissal of the writ petition, as argued by the respondent department, which also suggested relegating the matter to the Appellate Tribunal under Section 112 of the BGST/CGST Act, 2017?