2022 (7) TMI 508 - HC - GST

Tax Demand Notice Set Aside as Premature While Appeal Against Refund Rejection Remains Pending Under Section 75

Abhishek Gumber, Proprietor of M/s. AG Enterprises Versus Commissioner of GST, New Delhi

The HC set aside a demand notice for tax, interest, and penalty as premature because an appeal against the adjudication order rejecting the petitioner's ... Protective demand - rejection of refund claim - forged input tax credit (ITC) - principal plea of the petitioner is that a show-cause notice (SCN) issued earlier i.e., SCN dated 08.02.2021, has already been adjudicated by the concerned authority, via the order dated 12.05.2022 - HELD THAT:- The record shows that the matter was listed before the Court for the first time on 29.06.2022. On the said date, the Court had issued notice in the instant writ petition. The coordinate bench, via the very same order, placed the matter before the roster Bench (which is the instant bench) today i.e., on 06.07.2022. It is clear that once the petitioner’s refund claim was rejected on the ground that it was founded on forged ITC, the petitioner would be liable to pay tax, interest and perhaps also penalty, in the event the adjudication order is sustained. The fact that an appeal has been preferred by the petitioner, which is pending adjudication, persuades to hold that, at this stage, the impugned show-cause notice is premature - the impugned demand notice dated 14.06.2022 is set aside, with liberty to the respondent to trigger the process under Section 75 of the Act and the attendant rules, once clarity is attained with regard to the outcome of the pending appeal lodged by the petitioner. Petition disposed off. Issues:Challenging a demand notice for tax, interest, and penalty - Refund claim rejection based on forged input tax credit - Premature show-cause notice - Appeal pending adjudication - Impugned demand notice premature - Setting aside demand notice - Triggering process under Section 75 of the Act.Analysis:The petitioner sought a writ to set aside a demand notice issued by the respondent, requiring the deposit of tax, interest, and penalty totaling a significant amount. The petitioner decided not to press the prayer for costs. The main contention was that a show-cause notice issued earlier had been adjudicated, resulting in the rejection of the petitioner's refund claim. The adjudicating authority found the refund claim to be based on a forged input tax credit (ITC) claim, leading to its rejection. An appeal against the adjudication order was lodged by the petitioner. The respondent confirmed the passing of the adjudication order and the lodging of an appeal by the petitioner. The impugned demand notice was issued to safeguard the revenue's interests, citing relevant provisions of the Act and Rules. The respondent argued that the demand notice was issued in accordance with Section 75 of the Act.The court noted that the matter was listed for the first time on a specific date, and despite the absence of a counter-affidavit, the respondent's position was presented by their counsel. Considering that the petitioner's refund claim was rejected due to forged ITC, the court acknowledged the potential liability of the petitioner for tax, interest, and penalty if the adjudication order stands. However, since an appeal was pending adjudication, the court deemed the impugned show-cause notice premature. The court held that once the appeal outcome is determined, the respondent could proceed under Section 75 of the Act and related rules. Consequently, the court set aside the impugned demand notice, allowing the respondent to initiate the process under Section 75 post the appeal's resolution. The writ petition was disposed of accordingly, and the pending application was to be closed.