GST Input Tax Credit Worth Rs.39,93,286 Reversed Under Section 16(4) After Beedi Manufacturer Filed Late Returns

The HC dismissed a writ petition challenging reversal of Input Tax Credit (ITC) worth Rs.39,93,286 under Section 16(4) of CGST Act. The petitioner, a wholesale beedi manufacturer, filed GSTR 3B returns for 2017-18 and 2018-19 after due dates with late fees, but tax authorities reversed the ITC. The court ruled the petition was not maintainable under Article 226 as an alternative remedy existed through the appellate authority. Since a show-cause notice was already issued alleging willful delay in filing returns, the court directed the petitioner to respond through appropriate channels rather than seeking judicial intervention.

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Issues:
1. Reversal of Input Tax Credit (ITC) by respondents No.2 & 3.
2. Challenge regarding the application of Section 16(4) of the CGST Act.
3. Maintainability of the writ petition under Article 226 of the Constitution of India.
4. Alternative remedy available through filing an appeal before the appellate authority.
5. Allegation of willful delay in filing the return by the petitioner.

Analysis:

1. The petitioner, a partnership firm engaged in the wholesale beedi manufacturing business, challenged the reversal of Input Tax Credit (ITC) amounting to Rs.39,93,286/- by respondents No.2 & 3 through a demand notice dated 18.06.2021. The petitioner contended that the reversal was under protest and submitted a representation asserting genuine hardship due to a delay in filing GSTR 3B for the financial years 2017-18 and 2018-19.

2. The petitioner argued that despite filing the return after the due date with applicable late fees, the provisions of Section 16(4) of the CGST Act were erroneously applied. The petitioner emphasized that the right to file a return with a late fee should not be negated, and there should be consideration for delays beyond the taxpayer's control. The petitioner sought relief through a writ of mandamus to permit late submission of the return and refund of the ITC.

3. The respondents contended that the writ petition was not maintainable under Article 226 as the petitioner had an alternative remedy of appealing before the appellate authority. Additionally, a show-cause notice issued during the petition's pendency required the petitioner to respond, further supporting the argument for an alternative remedy.

4. The Court acknowledged the petitioner's delayed filing of the return, leading to the reversal of entries under Section 16(4) of the CGST Act. The respondents alleged willful delay by the petitioner to accommodate ITC, prompting the need for adjudication. As a show-cause notice had been issued, the Court held that the petitioner must respond through the appropriate channels, indicating no grounds for interference.

5. Consequently, the Court dismissed the Writ Petition, emphasizing the need for the petitioner to address the show-cause notice and engage with the competent authority regarding the alleged willful delay in filing the return, maintaining the dismissal based on the circumstances presented in the case.

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