Judicial Review Mandates Comprehensive Examination of GST Input Tax Credit Transfer Dispute Between Corporate Entities

HC examined a dispute over a GST input tax credit (ITC) transfer of Rs. 2,42,92,076/- between companies. While declining to directly interfere with the show cause notice, the court directed tax authorities to comprehensively review the petitioner's submissions, considering prior judicial guidance on portal-related ITC transfer challenges. The judgment preserved all procedural and substantive rights of both parties during the ongoing tax assessment process.

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Issues involved:
The issues involved in the judgment are the impugning of a Show Cause Notice proposing a demand for a sum of Rs. 3,87,27,783/- along with interest and penalty due to non-consideration of input tax credit (ITC) transferred by the business transfer agreement, and the petitioner's grievance against the initiation of recovery proceedings for allegedly wrongly availed ITC.

Impugned Show Cause Notice and Transfer of ITC:
The petitioner challenged a Show Cause Notice dated 24.09.2023, contesting a demand for Rs. 3,87,27,783/- along with interest and penalty, resulting from the non-consideration of input tax credit (ITC) of Rs. 2,42,92,076/- transferred by the business transfer agreement between Tikona Digital Networks (TDN) and the petitioner. The petitioner claimed that the ITC transfer was done manually due to the non-functioning of the GST portal at the material time, and the same was communicated to the concerned officer.

Scrutiny Notice and Alleged Wrongful Availment of ITC:
Subsequently, the petitioner received a scrutiny notice on 01.01.2021, proposing to recover a demand of Rs. 2,42,92,076/- for alleged wrongful availment of ITC. Despite responding to the scrutiny notice on 28.01.2021 and explaining the reason for the mismatch in returns, the petitioner was aggrieved by the initiation of recovery proceedings based on the allegedly wrongly availed ITC.

Judicial Directions and Court's Decision:
The petitioner's counsel highlighted that the Gujarat High Court and the Allahabad High Court had directed authorities to consider cases where Form GST ITC-02 was not available on the online portal. The High Court, while disposing of the petition, declined to interfere at the stage of the impugned Show Cause Notice. However, it directed the concerned officer to consider all contentions of the petitioner, including the directions issued by the Allahabad High Court and the Gujarat High Court in the petitioner's case. The judgment clarified that all rights and contentions of the parties were reserved, and the petition along with pending applications were disposed of accordingly.

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