Tyre Dealer's Tax Credit Challenge: Statutory Appeal Mandated with Partial Tax Deposit Under Section 107

The HC addressed a tax credit dispute involving a tyre dealer's TRAN-II credit under CGST/SGST Act. The court rejected direct judicial intervention, directing the petitioner to file a statutory appeal under Section 107 within three weeks. The appeal must include a partial tax deposit, with the remaining demand kept in abeyance. The court emphasized resolving the matter through the prescribed administrative appellate mechanism.

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Issues involved: Interpretation of input tax credit u/s 73(1) of CGST/SGST Act, validity of show cause notice, availability of statutory appeal u/s 107 of CGST/SGST Act.

Interpretation of input tax credit u/s 73(1) of CGST/SGST Act:
The petitioner, a dealer in tyres and tubes, received a show cause notice u/s 73(1) of the CGST/SGST Act alleging wrongful availment of input tax credit. The petitioner contended that the credit was appropriately transitioned as per Section 140(3) of the CGST Act. However, the assessing authority held that availing TRAN-II credit under CGST was irregular due to violation of the Act and Rules. The authority upheld the demand in the show cause notice, leading to a dispute over the interpretation of input tax credit provisions.

Validity of show cause notice:
The petitioner challenged the show cause notice, arguing that the correct credit was availed, as evidenced by subsequent returns allowing TRAN-II credit. Despite the petitioner's contentions, the assessing authority maintained the demand in the notice, emphasizing the violation of rules regarding credit availing on stock held on the appointed day. This raised concerns regarding the validity and grounds of the show cause notice issued to the petitioner.

Availability of statutory appeal u/s 107 of CGST/SGST Act:
The Court highlighted the petitioner's remedy of statutory appeal u/s 107 of the CGST/SGST Act, emphasizing that the petitioner should have pursued this avenue instead of approaching the Court directly. Considering the availability of this alternate remedy, the Court declined to examine the assessment order in detail and directed the petitioner to file an appeal before the appellate authority. The Court granted liberty to file the appeal within three weeks, with a deposit requirement for a portion of the assessed tax, ensuring the remaining demand is kept in abeyance pending appeal resolution.

Conclusion:
The Court disposed of the writ petition, directing the petitioner to pursue the statutory appeal route under Section 107 of the CGST/SGST Act. The petitioner was granted the opportunity to appeal within three weeks, subject to a deposit condition for a portion of the assessed tax. The Court emphasized that the appeal would be decided on merits without delving into the question of limitation. Additionally, any pending interlocutory application in the writ petition was dismissed.

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