Petition Challenging Fraudulent ITC Reversal Not Maintainable; Appeal Must Be Filed Under Relevant Rules

The HC held that the petition challenging the reversal of ineligible ITC on grounds of fraudulent availment was not maintainable as the order was appealable. The petitioner was directed to pursue the appellate remedy before the Appellate Authority. The Court emphasized that factual issues related to fraudulent ITC claims cannot be adjudicated under writ jurisdiction. Since an appeal against the impugned order was already filed and the ITC reversed, the petitioner was allowed to file a fresh appeal manually within one month with a waiver application for pre-deposit. The Court ruled that such appeal would not be dismissed on limitation grounds and must be decided on merits. The petition was disposed of accordingly.

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ISSUES:

Whether the impugned order demanding reversal of Input Tax Credit (ITC) on account of supplier's GST registration cancellation is sustainable.Whether there is an overlap between demands raised in two separate orders relating to IGST and CGST/SGST respectively.Whether writ jurisdiction under Article 226 of the Constitution can be exercised in cases involving fraudulent availment of ITC.Whether the petitioner is entitled to waiver of pre-deposit for filing appeal against the impugned order.Whether limitation period can be condoned for filing appeal against the impugned order.

RULINGS / HOLDINGS:

The impugned order demanding reversal of ITC is an appealable order and the petitioner should avail the appellate remedy rather than seeking relief under writ jurisdiction.The Court held that there is no overlap between the two orders as the earlier order relates to IGST demand and the impugned order relates to CGST & SGST demands.The Court reaffirmed that writ jurisdiction under Article 226 is an extraordinary jurisdiction and should not be exercised to support unscrupulous litigants involved in fraudulent availment of ITC.The petitioner is permitted to file appeal with an application for waiver of pre-deposit, which the Appellate Authority will decide after considering the reversal of ineligible ITC already done by the petitioner.The limitation for filing appeal is condoned if the appeal is filed within one month from the date of the Court's order and such appeal shall be decided on merits without rejection on limitation grounds.

RATIONALE:

The Court relied on the statutory framework under Section 16 and Section 107 of the Central Goods and Services Tax (CGST) Act, which governs the entitlement to ITC and the appeal mechanism against orders passed by tax authorities.The Court emphasized the purpose of ITC under Section 16 of the CGST Act as a business-friendly incentive to avoid double taxation, which is susceptible to misuse through fraudulent transactions involving non-existent firms.The Court referred to precedent holding that writ jurisdiction is not appropriate for adjudicating complex factual disputes involving fraudulent availment of ITC and penalty imposition, which require detailed factual analysis and are better suited for appellate forums.The Court noted the risk of multiplicity of litigation and contradictory findings if parties attempt to pursue different remedies before different forums simultaneously.The Court exercised discretion to condone limitation and permit filing of appeal with a waiver of pre-deposit application, balancing the need for procedural compliance with substantive justice given the reversal of ITC already undertaken by the petitioner.

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