Input Tax Credit mismatch and factory license renewal charges can be appealed to Appellate Commissioner

The Madras HC held that demands arising from Input Tax Credit mismatch with supplier's tax payments and tax on factory license renewal charges could be adjudicated by the petitioner before the Appellate Commissioner. The petitioner was permitted to file an appeal on these issues. However, demands concerning Reverse Charge Mechanism on ocean freight charges were dropped. The writ petition was partly allowed, enabling the petitioner to pursue appellate remedies for specific tax demands while obtaining relief on freight-related charges.

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Issues:
Challenge to Order-in-Original dated 14.12.2022 confirming demand proposed in Show Cause Notice No.29/2022. Interpretation of tax confirmed in paragraph 15(g) and interest in paragraph 15(h) in light of Supreme Court decision. Adjudication of demand arising from Input Tax Credit mismatch and tax on renewal charges for Factory License. Appeal process before the Appellate Commissioner.

Analysis:
The Writ Petition challenges the Order-in-Original confirming the demand proposed in Show Cause Notice No.29/2022. The impugned order demanded various amounts towards wrongly availed Input Tax Credit and nonpayment of IGST under RCM on Ocean freight charges and GST under RCM on receipt of service from the Government Department. The order also imposed penalties on the tax demanded for contraventions mentioned above. The petitioner contested the tax confirmed in paragraph 15(g) and interest in paragraph 15(h) citing a decision of the Supreme Court which held that a tax on a service included as part of a tax on the composite supply of goods cannot be allowed.

The Court, in light of the Supreme Court decision, dropped the demand confirmed in paragraph 15(g) and paragraph 15(h) of the impugned order. However, the Court directed the petitioner to adjudicate the remaining demand arising from the mis-match between Input Tax Credit availed and tax paid by the supplier and the demand of tax on renewal charges for Factory License before the Appellate Commissioner. The petitioner was granted liberty to file an appeal on the remaining issues before the Commissioner of GST & Central Excise (Appeals), Coimbatore at Madurai. The Commissioner was suo motu impleaded as the second respondent in the proceeding.

The Court allowed the Writ Petition partly, instructing the petitioner to file an appeal before the second respondent within 30 days on the remaining issues. The second respondent was directed to pass an appropriate order on merits and in accordance with the law. The petitioner was required to deposit 10% of the balance amount on the duty confirmed in the impugned order while filing the appeal. No costs were awarded, and the connected Miscellaneous Petition was closed.

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