2021 (3) TMI 1128 - HC - GST

Court rejects stay on denial of Input Tax Credit due to tax payment mismatch under CGST Act

The Court dismissed the applications seeking a stay on the impugned orders related to denial of Input Tax Credit (ITC) due to a mismatch in tax payment ... Vires of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 - rejection of Input Tax Credit (ITC) on account of mismatch between ITC claimed in Form GSTR-3B vis-å-vis ITC reflecting in Form GSTR -2A on the GST portal - HELD THAT:- Section 16 provides for Eligibility and Conditions for taking ITC. Entitlement for ITC is subject to certain conditions and Section 16(2)(c) provides that subject to Sections 41 and 43A of the Act, the amount claimed as ITC is actually paid to the Government. Admittedly, aforesaid condition precedent for taking ITC has not been fulfilled. Petition dismissed. Issues:Challenge to Section 16(2)(c) of the CGST Act and assessment orders dated 16.11.2020, Stay of operation of the impugned orders, Denial of Input Tax Credit (ITC) due to mismatch in tax payment, Appeal under Section 107 of the CGST Act, Legality of the impugned orders, Eligibility and Conditions for taking ITC.Analysis:The petitioners, Bharti Airtel Limited and Bharti Telemedia Limited, contested the validity of Section 16(2)(c) of the CGST Act and two assessment orders dated 16.11.2020. They challenged the denial of Input Tax Credit (ITC) due to a mismatch between ITC claimed and reflected on the GST portal. The petitioners argued that the denial of ITC was unjust as it was due to the default of the supplier in paying taxes. They also highlighted similarities with the Value Added Tax (VAT) regime where a similar provision was struck down.The petitioners sought a stay on the operation of the impugned orders through applications filed for the same. They contended that they had fulfilled the conditions for filing an appeal under Section 107 of the CGST Act by depositing 10% of the disputed tax amount. They argued that this action should be considered as a stay on recovery proceedings for the remaining tax amount.On the other hand, the Respondents, represented by learned counsel, defended the legality of the impugned orders. They maintained that unless Section 16(2)(c) of the CGST Act was invalidated, the petitioners were not entitled to any relief. They emphasized the differences between the CGST regime and the VAT regime, asserting that an analogy with the VAT regime was not applicable.The Court analyzed Section 16 of the CGST Act, which outlines the conditions for claiming ITC. It noted that the condition of actually paying the claimed ITC amount to the Government, as per Section 16(2)(c), had not been met by the petitioners. Consequently, the Court concluded that no interim order was warranted, leading to the rejection of the prayer for an interim order.As a result, the Court dismissed the applications seeking a stay on the impugned orders. It directed Respondent No.4 to file counter affidavits within three weeks and allowed the petitioners to file reply affidavits. Both cases were scheduled for a joint listing after three weeks for further proceedings.