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 returns for supplies made during August to November 2019. The Court held that the petitioner's delay in approaching the HC was fatal and that questions regarding the legality of ITC denial and tax demand are to be examined by the appellate authority under Section 107 of the GST Act. The HC declined to exercise its extraordinary jurisdiction under Articles 226 and 227, directing the petitioner to pursue remedy through the statutory appellate process. The writ petition was disposed of accordingly.

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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.

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