2022 (4) TMI 416 - HC - GST

GST Input Tax Credit Denial Quashed After Partner's Death in Firm Requiring Fresh Evaluation Within Three Months

M/s. Arun Structurals Versus The State Tax Officer, Pudukkottai.

The HC quashed an order denying input tax credit of Rs. 17,60,473 to a partnership firm that had undergone transition after a partner's death. The court ... Denial of Input Tax Credit - transition of credit, at the time of making new firm - denial of credit on the ground that the amount was not reflected in the monthly return filed for the month of June 2017 - opportunity of hearing not given to petitioner - violation of principles of natural justice - HELD THAT:- The question that has to be answered is whether credit which was lying unutilised in the hands of M/s.Arun Structurals, which had TIN No.33604100485 and whether the above said credit could have been transferred in the name of the petitioner also called ''M/s.Arun Structurals'' with new TIN No.33886477864 on 10.04.2017. If the above said credit could be validly transiting from M/s.Arun Structurals, bearing TIN No.33604100485 or M/s.Arun Structurals with new TIN No.33886477864 [the petitioner herein], I do not see why the credit should not be allowed to the petitioner. The impugned order has been passed without following the principles of natural justice and therefore, it is liable to be quashed. It is also noticed that the attempt of the respondent is to deny the input tax credit which remained unutilised from the month of April 2017 after one of the partners died, which led to surrendering the old registration and obtaining fresh registration from the VAT Authorities. The case remitted back to the respondent to pass a speaking order - petition allowed by way of remand. Issues:Challenging denial of input tax credit due to transition of partnership firm, violation of principles of natural justice in passing impugned order, failure to provide required details for claiming input tax credit under relevant rules.Analysis:1. The petitioner contested the order denying input tax credit of Rs. 17,60,473 due to transition of a partnership firm after a partner's demise. The petitioner's predecessor was a partnership firm where legal heirs were added as partners post the partner's death, obtaining fresh registration. The petitioner reported the opening balance of input tax credit, which was not reflected in the online return, leading to a representation to permit transition to the new firm.2. The petitioner claimed input tax credit in subsequent monthly returns under the Goods and Services Tax Act, attempting to transition the credit, now sought to be denied. The impugned order was issued without hearing the petitioner, violating principles of natural justice, despite the petitioner responding to pre-assessment notice.3. The respondent contended that the unutilized credit was not reflected in the June 2017 return, barring transition to the new GST regime. Referring to Rule 10(8)(a) of the TN VAT Rules, the respondent argued that required details for claiming input tax credit were not furnished by the petitioner, hindering the transfer to the new TIN number.4. The court examined whether the unutilized credit from the previous firm could be validly transitioned to the petitioner's new TIN number. It highlighted the need for a speaking order, directing the respondent to review the petitioner's records under the TN VAT Act and Rules to determine the validity of the transition, allowing it if found legally transmitted.5. The court quashed the impugned order for lack of natural justice, instructing the respondent to reevaluate the transition within three months from the order date. The petitioner was directed to provide all necessary documents for substantiation. The writ petition was disposed of without costs, closing connected miscellaneous petitions.