2025 (8) TMI 154 - HC - GST

HC dismisses ITC denial challenge; directs appeal under Section 107 of GST Act due to petitioner's delay

The HC dismissed the writ petition challenging the disallowance of ITC on the ground that the supplier failed to discharge tax liability by filing GSTR-3B ... Disallowance of ITC - supplier did not discharge its tax liability by filing GSTR-3B returns - discrepancy in Form GSTR-3B vis-à-vis claim of ITC - HELD THAT:- It is manifest from perusal of order dated 25.02.2025 under Section 74 of the GST Act that on account of non- discharge of tax liability by the supplier for the supplies made to the petitioner-recipient during the months of August, September, October and November of 2019 by furnishing returns in GSTR-3B, the Assessing Authority has examined the documents produced before him and disallowed the claim of ITC and raised the impugned demand. In the case of Bikash Panigrahi Vrs. The Commissioner Commercial Tax CT and Goods and Service Tax and others, [2025 (7) TMI 1248 - ORISSA HIGH COURT], this Court declined to entertain the writ petition, which was filed beyond the outer-limit specified under sub-section (4) of Section 107 of the GST Act - In the present matter, it is perceived that the petitioner has not approached this Court within the period specified under sub-section (1) of Section 107 of the GST Act; as a consequence of which, exercise of discretion to entertain the writ petition is not deemed warranted. So far as disallowance of ITC on the premise that the supplier having not discharged its liability by furnishing statutory returns, the availment of ITC by the recipient whether is in conformity with statutory requirement could be subject-matter of examination and determination by the appellate authority on merits. To have clear-cut finding on this aspect the appellate authority is vested with the power to reappreciate evidence already adduced during the course of proceeding under Section 74 and/or to be adduced before him - In the instant case since the supplier is alleged not to have discharged its tax liability by furnishing returns with respect to transactions effected with the petitioner during August, September, October and November of 2019, the Assessing Authority having perused the books of accounts vis-à-vis documents furnished before him raised the demand on appreciation of evidence. Thus, to question the legality and propriety of such demand, proper course to challenge the order of demand is before the appellate forum subject to compliance, of course, inter alia provisions of sub-section (6). In the present case, since the disputed questions of fact are involved, this Court is of the considered view that the appellate authority is the competent authority to deal with the facts as well as the law. The issues raised in the present case can very well be addressed to in appeal under Section 107 of the GST Act - This Court is, therefore, not inclined to exercise its discretionary extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. Accordingly, the writ petition stands dismissed. However, the petitioner is at liberty to avail the alternative remedy as available under the GST Act. It is made clear that for the purpose of writ petition, the facts are discussed and such facts as narrated above may not be treated as expression of opinion touching the merit of the matter. Petition disposed off. ISSUES: Whether a demand under Section 74 of the GST Act can be sustained for disallowance of Input Tax Credit (ITC) on the ground that the supplier did not discharge its tax liability by filing GSTR-3B returns.Whether the recipient of ITC can be held liable to reverse ITC due to the supplier's failure to comply with GST return filing requirements under Section 16(2)(c) of the GST Act.Whether a writ petition challenging an order passed under Section 74 of the GST Act is maintainable when an alternative remedy of appeal under Section 107 is available.Whether delay in filing a writ petition beyond the limitation period prescribed under Section 107(1) and (4) of the GST Act affects the maintainability of the writ petition.Whether the Court can entertain a writ petition involving disputed questions of fact relating to fraudulent availment of ITC and complex factual matrix. RULINGS / HOLDINGS: The demand under Section 74 of the GST Act for disallowance of ITC on account of the supplier's failure to file GSTR-3B returns is upheld as the Assessing Authority duly examined evidence and applied Section 16(2)(c) correctly.The recipient of ITC cannot avoid reversal of ITC by relying solely on the fact that tax was paid to the supplier; the statutory requirement under Section 16(2)(c) mandates disallowance where the supplier has not discharged tax liability.The writ petition challenging the order under Section 74 is premature and not maintainable since an efficacious alternative remedy of appeal under Section 107 is available and was not availed.Delay in filing the writ petition beyond the three-month period prescribed under Section 107(1), and the additional one-month condonable period under Section 107(4), without any explanation, militates against entertaining the writ petition.The Court will not exercise writ jurisdiction in matters involving disputed factual issues, such as fraudulent availment of ITC, complex transactions, and factual determinations that are within the purview of appellate authorities. RATIONALE: The Court applied the provisions of the Central and Odisha Goods and Services Tax Acts, particularly Sections 16(2)(c), 73, 74, and 107, governing ITC reversal, assessment, and appeals.Precedents establish that writ jurisdiction under Articles 226 and 227 is extraordinary and should not be exercised where alternative statutory remedies exist, except in cases involving breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires.The Court relied on prior decisions emphasizing that disputed factual questions and complex factual matrices related to tax assessments and ITC claims are to be adjudicated by appellate authorities rather than writ courts.The limitation period under Section 107(1) and the discretionary condonation under Section 107(4) set an outer limit for filing appeals, and failure to comply without sufficient cause justifies dismissal of writ petitions filed beyond that period.The Court recognized the serious nature of fraudulent ITC claims and the potential adverse impact on the GST regime, underscoring the need to prevent misuse of the ITC facility and avoid multiplicity of litigation through appropriate statutory channels.