2021 (6) TMI 1052 - HC - GST

Petitioner seeks recovery for GST discrepancies, court admits petition for hearing.

The petitioner claimed Input Tax Credit but faced discrepancies in GST filings by the seller. The petitioner argued for recovery from the seller based on ... Input Tax Credit - automatic reversal of Input Tax Credit - recovery from supplier versus recipient - interim protection on deposit - restraint on coercive steps - physical verification of invoicesInterim protection on deposit - restraint on coercive steps - Whether interim relief restraining coercive action should be granted on deposit of a portion of the amount demanded - HELD THAT: - The High Court admitted the petition and considered the petitioner's application for ad-interim relief. Having examined the record, the Court directed that if the petitioner deposits 5% of the amount demanded in the impugned recovery order within 15 days, no coercive steps shall be taken pursuant to that order. The direction is a protective measure limited to the consequences of the recovery order pending adjudication of the petition. The Court exercised its discretion to stay coercive measures conditioned upon the specified deposit, leaving the substantive dispute for adjudication after pleadings are filed.On deposit of 5% of the amount demanded within 15 days, no coercive action shall be taken pursuant to the recovery order dated 22.01.2021.Input Tax Credit - automatic reversal of Input Tax Credit - recovery from supplier versus recipient - physical verification of invoices - Substantive controversy regarding denial/recovery of Input Tax Credit where supplier's returns/invoice upload do not match recipient's claim requires adjudication - HELD THAT: - The Court noted the material conflict between the petitioner's claimed Input Tax Credit and the GST Form 2A/ITC details as reflected by the seller, and recorded the petitioner's submission regarding the GST Council press release that there is no automatic reversal of ITC on non-payment by the seller and that recovery should ordinarily be from the seller except in exceptional circumstances. The petitioner's offer of physical verification was not accepted at the departmental stage. The Court observed that these contentions and the legal question whether recovery can be made from the buyer in the circumstances indicated require consideration on merits. Consequently the Court directed service and filing of a reply within four weeks and listed the matter for further hearing, thereby leaving the substantive issue to be decided after full consideration of the parties' pleadings and material.The substantive question as to entitlement to Input Tax Credit and the propriety of recovery from the recipient is left for adjudication after filing of the reply and further hearing; the respondents are directed to file their reply within four weeks.Final Conclusion: The petition was admitted and an interim protection was granted: upon deposit of 5% of the amount demanded within 15 days, no coercive steps shall be taken under the impugned recovery order; the substantive dispute regarding entitlement to Input Tax Credit and whether recovery may be effected from the recipient instead of the supplier is remitted for consideration after the respondents file their reply and the matter is listed for further hearing. Issues:1. Denial of Input Tax Credit claimed by the petitioner due to discrepancies in GST filings by the seller.Analysis:The petitioner claimed Input Tax Credit (ITC) amounting to 95464.59 lakhs, but the 2A GST, ITC Form showed a lower amount of 86606.67 lakhs, resulting in a difference of 8857.91 lakhs along with interest. The petitioner argued that as per a Press Release of the GST Council, there should not be an automatic reversal of ITC of the buyer if the seller fails to pay taxes. The petitioner contended that recovery should be sought from the seller in such cases. However, the seller's filings did not match with the purchases made by the petitioner, indicating possible non-filing of returns by the seller. The petitioner offered physical verification, which was not accepted. Citing a judgment by the Madras High Court, the petitioner argued that recovery should be primarily from the seller, and action against the buyer should be exceptional.The Union of India and the State Counsel requested time to file a reply. The notice and recovery order dated 22.01.2021 raised by the petitioner were found to warrant consideration. The petition was admitted for hearing, and the respondents were directed to file a reply within four weeks. The petitioner was instructed to deposit 5% of the demanded amount within 15 days to avoid coercive measures as per the order dated 22.01.2021. The case was scheduled for listing in the week commencing 02nd August 2021, as per court rules.