High Court rejects writ petition on Input Tax Credit dispute, directs petitioner to use Section 107 statutory remedy instead

The Gauhati HC declined to entertain a writ petition challenging an Order-in-Original regarding Input Tax Credit on coal purchases and bank account freezing. The court held that where adequate statutory remedy exists under Section 107 of CGST/AGST Act 2017, writ jurisdiction under Article 226 should not be exercised. The petitioner received proper show cause notice and opportunity to respond, indicating no total violation of natural justice principles. The court distinguished between complete denial of hearing versus procedural irregularities, finding this case fell in the latter category. The petition was disposed of with liberty to pursue statutory appellate remedy.

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Issues Involved:

1. Validity of the Order-in-Original and the Demand-cum-Show Cause Notice under Section 74 of the CGST/AGST Act, 2017.
2. Alleged violation of principles of natural justice in the adjudication process.
3. Availability and adequacy of statutory remedy under Section 107 of the CGST/AGST Act, 2017.
4. Freezing of the petitioner's bank account and its implications on filing an appeal.
5. Applicability of precedent set in a similar case regarding pre-deposit requirements.

Issue-wise Detailed Analysis:

1. Validity of the Order-in-Original and the Demand-cum-Show Cause Notice:

The petitioner challenged the Order-in-Original dated 16.08.2024 and the accompanying Demand-cum-Show Cause Notice issued under Section 74 of the CGST/AGST Act, 2017. The petitioner alleged erroneous refund claims and discrepancies in Input Tax Credit (ITC) claims for the period April 2022 to March 2023. The adjudicating authority demanded tax, interest, and penalty amounting to Rs. 1,06,59,000/- based on these discrepancies. The court noted that the adjudicating authority had taken a tentative view based on the show cause notice, which is a step towards a final decision, and not a final determination of rights and obligations.

2. Alleged Violation of Principles of Natural Justice:

The petitioner argued that the adjudicating authority failed to provide an opportunity for a personal hearing or to submit a reply to the Demand-cum-Show Cause Notice. However, the court observed that the petitioner did receive the notice and had the opportunity to respond, which they did not utilize. The court distinguished between total violation of the rule of audi alteram partem and a mere procedural lapse, concluding that there was no total violation in this case.

3. Availability and Adequacy of Statutory Remedy:

The court emphasized the principle that in revenue matters, a writ petition under Article 226 is not ordinarily entertained when an adequate and efficacious statutory remedy is available. Section 107 of the CGST/AGST Act, 2017 provides for an appeal to the Appellate Authority, which includes provisions for a pre-deposit condition. The court reiterated that the petitioner should first exhaust this statutory remedy before seeking relief through writ jurisdiction.

4. Freezing of the Petitioner's Bank Account:

The petitioner contended that the freezing of their bank account hindered their ability to make the pre-deposit required for filing an appeal. The court acknowledged this issue and referenced a similar case where the petitioner was allowed to file an appeal without pre-deposit, provided the frozen accounts held sufficient funds to meet the pre-deposit requirement.

5. Applicability of Precedent Regarding Pre-deposit Requirements:

The court referred to a previous judgment where a petitioner in a similar situation was permitted to file an appeal without pre-deposit, subject to certain conditions regarding the frozen accounts. The court extended similar relief to the current petitioner, allowing them to file an appeal without pre-deposit if the frozen accounts contained sufficient funds. If not, the petitioner was granted liberty to deposit the required amount to fulfill the mandate under Section 107 [6] [b] of the CGST/AGST Act, 2017.

Conclusion:

The court disposed of the writ petition, directing the petitioner to pursue the statutory remedy of appeal under Section 107 of the CGST/AGST Act, 2017. The court provided specific directions regarding the pre-deposit requirement, considering the frozen status of the petitioner's bank account, thereby balancing equities and ensuring justice.

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