M/S Goyal Sanitary Store Gwalior Through Its Proprietor Mr Om Prakash Goyal vs. Union Of INDIA

Held

The Court held that the first discrepancy, concerning the ITC availed on the basis of invoices from suppliers whose registrations were allegedly cancelled retrospectively, could not be sustained. It was transpired during arguments that there was no express or physical letter on record from the respondents demonstrating the retrospective cancellation of registration of any of the dealers/suppliers in question, particularly for the relevant assessment year 2018-19. Consequently, nothing survived in the show cause notice to be addressed on merits regarding this discrepancy. The Court quashed the impugned notices (Annexure P/1 and P/3) to this extent. However, the respondents were granted liberty to serve a fresh notice with evidence of specific details in the context of cancellation of dealers' registrations. The second point regarding the interest of Rs. 65/- was considered not of much relevance. The writ petition was disposed of accordingly.

Facts

The petitioner, M/s Goyal Sanitary Store, engaged in trading sanitary wares, sought Input Tax Credit (ITC) for the period April 1, 2018, to March 31, 2019. The Deputy Commissioner, Central Excise and CGST Division-1, Gwalior, issued a show cause notice on December 30, 2022, citing two discrepancies: (i) ITC of Rs. 67,74,604/- was availed based on invoices from suppliers whose registrations were retrospectively cancelled, and (ii) delay in tax payment for certain months attracting Rs. 65/- interest. The petitioner denied the allegations, stating that the suppliers' registrations were not cancelled during the relevant period and requested a list of such dealers. The department reiterated the grounds in a subsequent intimation. The petitioner approached the High Court, arguing that the Revenue failed to provide the requested details, violating Rules 99, 100, and 142 of the CGST Rules. The Revenue contended that retrospective cancellation of dealers' registrations rendered transactions illegal and ITC inadmissible.

Key Issues

1. Whether the show cause notice issued by the respondent-department is sustainable in law, particularly concerning the allegation of ITC availed on the basis of invoices from suppliers whose registrations were retrospectively cancelled, without providing specific evidence of such cancellation for the relevant period (Section 164 of the CGST Act, 2017, and Rules 99, 100, 142 of the CGST Rules, 2017)? Petitioner's arguments: The petitioner argued that the Revenue failed to provide the list of dealers whose registrations were allegedly cancelled retrospectively, despite requests. They contended that this failure violated the procedural obligations under the CGST Rules, which mandate the provision of details upon request. Therefore, the show cause notice, lacking substantiating evidence, should be quashed. Revenue's arguments: The Revenue argued that if dealers' registrations were cancelled retrospectively, any business transactions with them would be illegal, making the petitioner ineligible for ITC. They asserted that the show cause notice correctly pointed out these irregularities and that the petitioner could file an appeal against it. They also claimed that the department had highlighted irregularities in the filing of returns by companies whose registrations were cancelled retrospectively.