2025 (4) TMI 1239 - HC - GST

Taxpayer Granted Extension to Challenge Rs. 7.8 Lakh GST Tax Credit Demand Through Exceptional Judicial Discretion

HC analyzed a GST tax credit dispute involving a Rs. 7,88,611/- demand against a taxpayer. Despite procedural limitations, the court exercised ... Maintainability of petition - availability of alternative remedy - Seeking issuance of an appropriate writ assailing the impugned order - excess claim of ITC - case of the Petitioner is that the Petitioner never came to know of the SCN - Principles of natural justice - HELD THAT:- As per Section 107 (1) of the Central Goods and Service Tax Act, 2017 (hereinafter, ‘CGST Act’), the limitation for filing an appeal is three months, which is extendible by one more month as per Section 107 (4) of the CGST Act. The Court has considered the matter. In terms of the impugned order, the Petitioner has to pay a demand of Rs. 7,88,611/-, including interest and penalty, which is a substantial sum. In terms of Notification 9/2023-State Tax dated 22nd June, 2023, 56/2023-Central Tax dated 28th December, 2023 and 56/2023 –State Tax dated 11th July, 2024, the limitation for passing of the order-in-original by the Adjudicating Authority has been extended. Though the challenge to the said notifications is not being pressed, in this Petition, this Court is of the opinion that considering the nature of the demand, the Petitioner ought to be given an opportunity to assail the order on merits and place its stand. This Court is not inclined to interfere with the impugned order. However, considering the plea that the Petitioner came to know of the impugned order only in March, 2025, the Petitioner is permitted to file an appeal challenging the impugned order, after making the pre-deposit in terms of Section 107 of the CGST Act - Petiiton disposed off. 1. ISSUES PRESENTED and CONSIDERED- Whether the impugned order dated 14th December 2023, demanding Rs. 7,88,611/- on account of alleged excess Input Tax Credit (ITC) claim, is liable to be set aside or interfered with.- Whether the Petitioner had received proper notice of the Show Cause Notice (SCN) dated 24th September 2023 and the impugned order, and if failure to file a reply or appeal within limitation is excusable.- Whether the limitation period for filing an appeal against the impugned order bars the Petitioner from challenging the order.- The applicability and effect of Notification Nos. 9/2023-State Tax dated 22nd June 2023, 56/2023-Central Tax dated 28th December 2023, and 56/2023-State Tax dated 11th July 2024 on the limitation for passing the order-in-original.- Whether the Petitioner should be granted an opportunity to file an appeal and challenge the impugned order on merits despite the delay and limitation issues.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of the impugned order demanding excess ITCThe impugned order was passed pursuant to a SCN alleging that the Petitioner had claimed excess Input Tax Credit as per GST records, resulting in a demand of Rs. 7,88,611/-. The Petitioner contended that it was unaware of the SCN and the impugned order until March 2025, and no reply was filed to the SCN. The Respondent relied on GST records and statutory provisions under the CGST Act to justify the demand.The Court noted the substantial amount involved and the statutory framework under the CGST Act, which empowers the adjudicating authority to pass such orders upon due process. However, the Petitioner's claim of non-receipt of the SCN or impugned order raised questions about procedural fairness.Issue 2: Notice and opportunity to be heardThe Petitioner argued that the SCN was uploaded on the Respondent's portal but was not personally communicated, and no reply was filed due to lack of knowledge. The Petitioner could not produce evidence such as screenshots to substantiate the claim of notice via the portal. The Respondent maintained that the SCN and order were duly issued as per procedure.The Court observed that the Petitioner only became aware of the SCN and impugned order when visiting the Respondent's office in March 2025, well after the issuance dates. The absence of a reply to the SCN was attributable to this lack of knowledge. The Court recognized the importance of notice in administrative proceedings but did not find sufficient grounds to invalidate the impugned order solely on this basis.Issue 3: Limitation for filing appeal under the CGST ActSection 107(1) of the CGST Act prescribes a limitation of three months for filing an appeal against an order-in-original, extendable by one month under Section 107(4). The Respondent contended that the Petitioner's appeal would be barred by limitation, as the impugned order was dated December 2023, and the Petitioner only sought relief in 2025.The Court acknowledged the statutory limitation but also considered the Petitioner's plea of delayed knowledge of the order. The Court further noted that the Notifications dated 22nd June 2023, 28th December 2023, and 11th July 2024 extended the limitation period for passing orders-in-original, though the Petitioner chose not to press challenges to these notifications.Issue 4: Effect of Notifications extending limitation periodThe Notifications were intended to extend the limitation for passing orders by the adjudicating authority, thereby indirectly affecting the limitation for filing appeals. The Petitioner did not press challenges to these Notifications, and the Court took note of their existence in the context of limitation.The Court opined that considering these Notifications and the substantial demand involved, the Petitioner ought to be afforded an opportunity to contest the order on merits rather than be foreclosed by limitation.Issue 5: Grant of opportunity to file appeal despite limitationBalancing the statutory limitation and the Petitioner's claim of delayed knowledge, the Court exercised discretion to permit the Petitioner to file an appeal within 30 days from the date of the order permitting such filing. The Court clarified that if the appeal is filed within this period, it shall not be dismissed on the ground of limitation and must be adjudicated on merits.This approach reflects the principle of substantive justice and procedural fairness, ensuring that the Petitioner is not unduly prejudiced by procedural delays or lack of notice.3. SIGNIFICANT HOLDINGS- 'Considering the nature of the demand, the Petitioner ought to be given an opportunity to assail the order on merits and place its stand.'- The Court held that despite the limitation prescribed under Section 107 of the CGST Act, the Petitioner's appeal filed within 30 days of the Court's order shall not be dismissed on limitation grounds and will be decided on merits.- The Court did not interfere with the impugned order itself but granted relief in the form of permitting the appeal, thereby balancing the statutory framework with principles of natural justice.- The Court recognized that procedural requirements such as issuance of SCN and opportunity to reply are critical but found no sufficient basis to invalidate the impugned order on grounds of non-receipt of notice alone.- The Notifications extending the limitation period for passing orders were noted but not challenged, influencing the Court's approach to limitation and appeal rights.