2023 (10) TMI 793 - HC - GST

Jharkhand HC quashes transitional credit denial, holds improper Section 73 notice and incorrect JVAT assessment considerations invalid

M/s. Aditya Medisales Limited through its Director, Mr. Rajiv Pandya Versus The State of Jharkhand, Joint Commissioner of State Taxes (Appeals), Ranchi, Deputy Commissioner of State Taxes, West Circle, Ranchi State Tax Officer,

Jharkhand HC allowed petition challenging denial of transitional credit under JGST Act. Court held proceedings were bad in law as only summary show cause ... Denial of Transitional credit - transition of input tax from the erstwhile regime i.e., the Jharkhand Value Added Act, 2005 and the JGST Act, 2017 - HELD THAT:- It appears that the initiation of proceedings is bad in law, inasmuch as, in this case only a summary of show cause notice in DRC – 01 was served and not the proper show cause notice. Admittedly, the Petitioner was only served a summary of show cause notice in Form DRC – 01 and not a proper show cause notice under Section 73 of the JGST Act. The issuance of a proper show cause notice is not evident from the order sheet. Neither the Respondents have brought on record any proper show cause notice in its counter affidavit. The requirement of Form JVAT 410/4111 in support of these purchase invoices was / is not required under the JVAT Act or the JGST Act. The Revenue had also disallowed the amount of purchases shown by the Petitioner on the ground that the details mentioned in JVAT 410 and 411 (i.e., details of inward supplies) is not in consonance with online returns i.e., JVAT 200 filed by its Sellers. In this regard the amount involved Rs. 8,57,911.31/-. On this issue it is observed that the AO for the purpose of transition of credit is only required to verify the figures specified in the TRAN-1 and whether conditions under Section 140(3) are satisfied. From a perusal of the impugned appellate order it is evident that the transitional credit has been disallowed not because of non-conformity with condition stipulated in Section 140(3) but because of considerations which were the subject matter of assessment under JVAT Act - Undoubtedly, tax paid on purchases of medicine products / food products is admissible as tax under JGST Act, more particularly because it does not fall within any of categories specified under Section 17(5) of the JGST Act. This court has therefore clearly held that under the garb of disallowing transitional credit, the Assessing Officer under the JGST Act cannot conduct an assessment of the returns filed under the JVAT Act. Application allowed. Issues Involved:1. Denial of transitional credit.2. Validity of show cause notices.3. Validity of summary orders.4. Legality of notice under Section 79.5. Release of bank account held by the State Bank of India.Summary:1. Denial of Transitional Credit:The petitioner, primarily dealing in medicine and medicinal products, transitioned credit amounting to Rs. 87,34,107/- under Sections 140(1) and 140(3) of the JGST Act. The appellate authority partially rejected the claim under Section 140(3), disallowing Rs. 23,86,069.85/- and raising a demand of Rs. 31,97,333.59/- including interest and penalty. The court found that the appellate order was perverse as Section 140(3)(iii) stipulates that an Assessee must be in possession of invoices or other supporting documents, and the invoices suffice the requirement. The requirement of Form JVAT 410/411 was deemed unnecessary.2. Validity of Show Cause Notices:The court found the initiation of proceedings invalid as only a summary of the show cause notice in Form DRC-01 was served, not the proper show cause notice under Section 73 of the JGST Act. This was a violation of principles of natural justice, as established in Juhi Industries (P) Ltd. versus State of Jharkhand.3. Validity of Summary Orders:The petitioner was only served with a summary order in Form DRC-07 dated 16.1.2019, not the actual adjudication order. The court held that the detailed order as per Section 73(9) of the JGST Act was not served, and the basis of the decision was not stated as required under Section 75(6).4. Legality of Notice under Section 79:The court observed that the notice for recovery under Section 79 of the JGST Act was based on an erroneous order. The appellate order was found to be perverse as it contradicted the assessment order for the same year, which found no discrepancy in the figures of purchases disclosed by the petitioner.5. Release of Bank Account:The court held that the actions of the Respondent Bank in holding the petitioner's bank account were invalid. There is no provision in the JGST Act allowing the bank to hold the account for such a substantial sum. Even if traced to Section 83 of the JGST Act, the attachment exceeded the permissible period and needed to be released.Conclusion:The writ application was allowed, and the impugned show cause notice, adjudication order, and appellate order were quashed and set aside. The court directed the release of the petitioner's bank account held by the State Bank of India.