M/S Aditya Industries vs. The State Of Hp And Others

Held

The Court held that the show cause notices issued under Section 74 of the HP GST Act were not in consonance with the statutory requirements. It was observed that Section 74 mandates that the proper officer must be satisfied that tax has not been paid, short-paid, erroneously refunded, or ITC has been wrongly availed or utilized due to fraud, willful misstatement, or suppression of facts to evade tax. The Court, relying on Supreme Court judgments in M/s Tata Steel Limited and M/s G.R. Infra Projects Limited, emphasized that mere bald assertions of fraud, willful misstatement, or suppression of facts are insufficient. The notice must contain foundational facts that lead to such an inference. In the present case, the Court found a lack of correlation between the allegations and the conclusion of fraud, willful misstatement, or suppression of facts. Consequently, the Court set aside the impugned show cause notice (Annexure P-3) and granted liberty to the Authority to issue a fresh notice if advised, with the issue of limitation not coming in the way if a notice is issued within 60 days. The issue regarding the constitutional validity of Section 16(2)(c), second proviso to Section 16(2)(d), and Section 16(4) of the CGST Act was expressly kept open.

Facts

The petitioner, M/s Aditya Industries, filed a writ petition before the Himachal Pradesh High Court challenging notices dated 02.07.2024 and 03.07.2024 issued by Respondent No. 3 under Section 74 of the HP GST Act/CGST Act. The petitioner sought to quash these notices, which denied Input Tax Credit (ITC), arguing they were issued without jurisdiction and were time-barred. The petitioner also contended that the show cause notices were issued without appreciating that tax had been paid to sellers and that all necessary documents for claiming ITC were in possession. Furthermore, the petitioner argued they could not be compelled to prove the seller's tax discharge. The core of the challenge was that the notices failed to meet the statutory requirements of Section 74.

Key Issues

1. Whether Section 16(2)(c), the second proviso to Section 16(2)(d), and the proviso to Section 16(4) of the CGST Act, 2017, are ultra vires the Constitution? 2. Whether the show cause notices dated 02.07.2024 and 03.07.2024, issued under Section 74 of the HP GST Act/CGST Act, are liable to be quashed for being issued without jurisdiction and for denying Input Tax Credit to the petitioner? Petitioner's Arguments: The petitioner argued that the impugned notices were issued without jurisdiction and were time-barred. They contended that the show cause notices failed to appreciate that the petitioner had already paid tax to the sellers and possessed all necessary documents for claiming ITC. The petitioner also argued that they could not be forced to perform the impossible task of proving whether the seller had discharged its tax liability. Additionally, the petitioner challenged the constitutional validity of specific provisions of the CGST Act related to ITC. Revenue's Arguments: The judgment does not record specific arguments made by the respondents (State of H.P. and others).