2023 (12) TMI 1051 - HC - GST

GST input tax credit blocked by non-functional GSTR-2 and portal limits on GSTR-3B; manual returns allowed, orders quashed.

Denial of belated ITC and rejection of returns was challenged on the ground that the statutory mechanism to claim ITC through GSTR-2 was not operational, ... Claim of Input Tax Credit - form and manner of claiming ITC under Rule 60 - non notification of Form GSTR 2 and its consequence - use of GSTR 3B to avail input tax credit - absence of an enabling mechanism prejudicing the assessee - permissibility of manual filing where electronic facility is not provided - non speaking order - remand for reconsideration of ITC claimClaim of Input Tax Credit - form and manner of claiming ITC under Rule 60 - non notification of Form GSTR 2 and its consequence - use of GSTR 3B to avail input tax credit - Entitlement to claim and retain ITC where Form GSTR 2 (prescribed under Rule 60) was not notified and the assessee had filed GSTR 3B physically/otherwise to account for ITC for the specified financial years. - HELD THAT: - The Court accepted the petitioner's contention that Rule 60 prescribes Form GSTR 2 for specifying inward supplies for ITC but that the Form GSTR 2 was not made available by GSTN; in that factual setting the absence of the statutorily prescribed enabling mechanism (GSTR 2) meant the assessee could not reasonably be expected to comply electronically. The Court observed that where the statutory/portal mechanism required for a taxpayer to claim credit is not available, the assessee should not be prejudiced and reliance on the recorded GSTR 3B filings (including physically tendered returns) cannot be the sole basis to deny legitimately entitled credit. The Court noted that the respondents' order failed to deal with this specific contention and that precedents of this Court and other High Courts support not denying ITC where there is no enabling mechanism for electronic claim. Applying that reasoning to the financial years in dispute, the Court concluded that the disallowance on the ground of belated claim without addressing non notification of GSTR 2 and portal constraints was unsustainable.Impugned orders disallowing ITC on the stated ground quashed; petitioner entitled to have ITC claim reconsidered in light of non notification of GSTR 2 and related portal constraints.Absence of an enabling mechanism prejudicing the assessee - permissibility of manual filing where electronic facility is not provided - non speaking order - Whether the authorities could sustain the assessment/order without addressing the petitioner's plea about lack of electronic facility and while issuing a non speaking order. - HELD THAT: - The Court found that the assessing authority did not deal with the petitioner's specific contentions that (a) GSTR 2 was not notified and hence electronic filing under the prescribed form was impossible, and (b) practical portal constraints prevented online filing of GSTR 3B where outward tax payment was not enabled. The order under challenge was held to be non speaking in that it did not meet or answer these determinative contentions. In view of the absence of an effective mechanism on the portal and the failure of the authority to consider the petitioner's bona fide explanations (including physical submissions), the Court held that the respondents could not rely on those technical non compliances to deny credit without fresh consideration.The orders were set aside for being non speaking and for failure to consider the enabling mechanism plea; authorities directed to permit manual filing where portal facility is absent and to reconsider the ITC claims.Remand for reconsideration of ITC claim - remand for reconsideration - Whether the matter should be remitted to the assessing authority for fresh consideration of the ITC claim and, if so, on what terms. - HELD THAT: - The Court remitted the matter to the respondents for fresh consideration because the assessing order had confirmed proposals without addressing crucial legal and factual contentions about non notification of GSTR 2 and portal limitations. The Court directed that the petitioner be permitted to file manual/belated returns when the petitioner claims ITC but cannot electronically file/pay output tax due to portal constraints, and that the authorities accept and examine such returns; if on reconsideration the returns are otherwise in order and in accordance with law, the ITC claim should be allowed. The remand contemplates adjudication on merits after affording the petitioner an opportunity to place records and for the authority to decide afresh.Matter remitted to authorities for reconsideration; respondents directed to permit manual filing and to accept belated returns and allow ITC if returns are in order.Remedy by way of writ where enabling mechanism absent - Maintainability of writ petitions despite availability of alternative appellate remedy where the grievance arises from absence of an enabling mechanism on the statutory portal. - HELD THAT: - Although the respondents contended that an alternative remedy by appeal was available, the Court entertained the writ petitions because the challenge related to the systemic absence of an enabling mechanism (non notification of Form GSTR 2 and portal incapacity) which, if left unaddressed, would cause irreparable prejudice to taxpayers. The Court exercised its discretionary jurisdiction and granted relief by quashing the impugned orders and directing remedial measures rather than relegating the petitioner to the appellate forum alone.Writ petitions allowed; Court exercised jurisdiction to grant relief given the systemic portal/notification issues and potential prejudice to the assessee.Final Conclusion: Impugned orders dated 16.08.2022 quashed. Petitioner permitted to file manual/belated returns for the relevant financial years (2017-2018 and 2018-2019) where the statutory Form GSTR 2 was not notified or portal constraints prevented electronic filing; matter remitted to authorities to reconsider the ITC claims afresh and allow the credit if returns and records are in order. Issues involved:The issues involve the quashing of impugned orders related to belated claim of Input Tax Credit (ITC) for the financial years 2017-2018 and 2018-2019, based on the scrutiny of GSTR-3B returns filed by the petitioner, and the contention that the filing of GSTR-3B is not meant for claiming ITC.Details of Judgment:Issue 1: Alleged belated claim of Input Tax Credit (ITC)The petitioner, engaged in the business of Petroleum Gases, contested the notice issued by the respondent department regarding the belated claim of ITC on the purchase of Petroleum products. The petitioner argued that the filing of GSTR-3B is not intended for claiming ITC and that the specific Form GSTR-2, meant for claiming ITC, was not notified. The petitioner maintained that the claim of belated ITC was false and misleading, as all tax liabilities were duly paid and accounted for.Issue 2: Legal procedures and notificationsThe petitioner highlighted the absence of Form GSTR-2 for claiming ITC, as per Rule 60 of the TNGST Rules, and the technical constraints preventing electronic filing due to the unavailability of the prescribed form. The petitioner emphasized that without the requisite forms being notified, the taxable person cannot be expected to file returns electronically, and the initiation of proceedings based on this was deemed unsustainable.Issue 3: Judicial Precedents and Enabling MechanismsCiting judicial precedents from other High Courts, the petitioner argued for the allowance of manual filing of returns in cases where electronic filing was not feasible due to technical issues. The petitioner emphasized the need for an enabling mechanism to prevent genuine taxpayers from being prejudiced by the unavailability of necessary forms for claiming ITC.Judgment Outcome:The High Court, after considering the arguments presented, quashed the impugned orders and directed the respondents to permit the petitioner to file manual returns for claiming ITC on outward supplies without paying taxes. The Court stressed the importance of enabling mechanisms to facilitate the legitimate claiming of ITC by taxpayers, and remitted the matter back to the authorities for reconsideration in accordance with the law.Conclusion:The writ petitions were allowed, with no costs incurred by either party, and the connected miscellaneous petitions were closed, emphasizing the need for procedural fairness and enabling mechanisms in tax-related matters.