2025 (12) TMI 316 - HC - GST

ITC Cess Credit Denial, Late GSTR-9 Filing Under Sections 44(2) and 47 Held Revenue Neutral, Remanded

Bidyut Autotech Private Limited and another Versus The Assistant Commissioner of State Tax, Bureau of Investigation, South Bengal (HQ) and others.

HC held that denying credit of unavailed ITC on cess, despite disclosure in Form GSTR-9, may offend Article 265, as it would effectively tax the ... Availability of ITC on cess - misstatement or suppression on the part of the petitioners in not disclosing the accumulated CESS in form GSTR-1 and GSTR-3B - applicaility of Section 44(2) of West Bengal/Central Goods and Services Tax Act, 2017, inserted by the Finance Act of 2023 with effect from October 1, 2023 - petitioners had filed their annual return in form GSTR-9 on August 28, 2023 - HELD THAT:- In terms of Article 265 of the Constitution of India no tax can be levied or collected except by authority of law. Now, in view thereof, if the Respondent GST authorities do not take into consideration the petitioners’ assertion that the petitioners have not availed ITC on the CESS paid by them on the inward supplies and the petitioners are burdened with CESS collected by them on outward supplies done by them without giving credit to the petitioners for the unavailed ITC in respect of the CESS on inward supplies then, in the considered view of this Court, such act may offend the spirit of Article 265 of the Constitution of India. Therefore, there does not appear to be any convincing reason for the GST. Authorities to altogether ignore the effect of Form GSTR-9. As regards the effect of the provisions of Section 44(2) of the said Act of 2017, this Court is of the view that the earlier avatar of Section 44(2) of the said Act of 2017 (i.e. prior to the amendment effected in 2023) there was no prohibition on the petitioners’ filing GSTR-9 beyond the prescribed date - Indeed the explanation appended to Section 44(2) of the said Act of 2017 provided for a date by which annual returns were to be filed but then since there was neither any fatal consequence provided for failure to file the same within that time nor was there any negative mandate prohibiting filing of return after a particular period, therefore the same cannot be interpreted in a manner so as to totally preclude late filers from filing the return. In fact the provision for late fees in filing annual return provided in Section 47 of the said Act of 2017 also indicates that total preclusion of late filers was not intended. Applying the law governing the field to the facts of the present case and especially in view of the mandate of Article 265 of the Constitution of India, even without relying on the said judgment of Ankit Kumar Agarwal (supra), this Court is of the considered view that due regard must be given by the appellate authority to the annual return filed by the petitioner in form GSTR-9 and the payment of the differential sum (i.e. the difference between the ITC available to the petitioners on the CESS paid by them to their supplier and the CESS collected by them from their purchasers) claimed to have been made by the petitioners thereby rendering the error of initial non-disclosure committed by the petitioners in their earlier returns revenue neutral. The appellate authority should, therefore, revisit the matter once again, in accordance with law. The order impugned dated February 6, 2025 passed by the appellate authority is set aside - matter is remanded to the file of the appellate authority for considering the appeal afresh - Petition disposed off by way of remand. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, in light of Article 265 of the Constitution and the scheme of input tax credit on CESS, the tax authorities could ignore the disclosures in Form GSTR-9 and deny credit of unavailed CESS ITC on inward supplies while demanding CESS on outward supplies. 1.2 Whether the amendment to Section 44(2) of the West Bengal/Central Goods and Services Tax Act, 2017, with effect from 1 October 2023, barred consideration of an annual return in Form GSTR-9 filed before that date but beyond the earlier prescribed time. 1.3 Whether the judgment in the case referred to as 'Ankit Kumar Agarwal' could be treated as a binding precedent for deciding the present matter. 1.4 Consequential relief: whether the appellate order confirming tax liability (with reduced penalty) required interference and remand for fresh consideration. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Effect of GSTR-9 disclosure, unavailed CESS ITC, and Article 265 Legal framework (as discussed) 2.1 The Court referred to Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law. 2.2 The Court proceeded on the basis of the statutory scheme under the GST Acts permitting availment of ITC of CESS paid on inward supplies to offset CESS liability on outward supplies, and noted the role of returns in Forms GSTR-3B and GSTR-9. Interpretation and reasoning 2.3 It was undisputed that CESS charged by suppliers on inward supplies was duly reflected in Form GSTR-2A and that the petitioners had not availed ITC of such CESS in their earlier returns. 2.4 The petitioners, on finalisation of accounts, disclosed the entire CESS in the annual return in Form GSTR-9 and asserted that they had paid the differential amount, i.e., the difference between CESS ITC available on inward supplies and CESS collected on outward supplies, rendering the earlier non-disclosure revenue neutral. 2.5 The appellate authority accepted that there was no wilful misstatement, suppression or fraud, and consequently converted the proceedings from Section 74 to Section 73, yet did not give effect to the disclosures in Form GSTR-9 and did not allow any benefit on account of accumulated unavailed CESS ITC. 2.6 The Court held that if the GST authorities fail to consider the assertion that ITC of CESS on inward supplies had not been availed, and yet burden the taxpayer with CESS collected on outward supplies without giving credit for such unavailed ITC, such action may offend the spirit of Article 265. 2.7 The Court found no convincing reason for the authorities to altogether ignore the effect of Form GSTR-9, especially when the appellate authority itself had relied on GSTR-9 to conclude that the case did not fall under Section 74. Conclusions 2.8 The appellate authority erred in not considering the disclosures in Form GSTR-9 and the claim of payment of the differential CESS, and in not examining revenue neutrality in the light of unavailed ITC on inward CESS. 2.9 Such non-consideration was inconsistent with the mandate of Article 265 and required the appellate authority to revisit the matter, giving due regard to Form GSTR-9 and the asserted differential payment. Issue 2: Applicability and effect of Section 44(2) (as amended in 2023) on late-filed GSTR-9 Legal framework (as discussed) 2.10 The Court examined Section 44(2) of the GST Act as amended by the Finance Act, 2023, made effective from 1 October 2023, introducing a 'mandatory prohibition' regarding furnishing of annual returns beyond a prescribed time. 2.11 The Court referred to the earlier version of Section 44(2) and the Explanation thereto, which prescribed a date by which annual returns were to be furnished but did not expressly provide fatal consequences or an express negative mandate against late filing. 2.12 The Court also referred to Section 47 of the GST Act providing for late fees for delayed filing of annual returns. Interpretation and reasoning 2.13 The State contended that the GSTR-9 could not be relied upon as it was filed beyond the time prescribed under Section 44(2), read with the Explanation, even prior to the amendment. 2.14 The Court accepted the petitioners' submission that the amended Section 44(2), having come into force on 1 October 2023, could not govern an annual return filed on 28 August 2023, i.e., prior to the amendment taking effect. 2.15 Examining the pre-amendment position, the Court held that although the Explanation to Section 44(2) indicated a due date, there was neither any statutory provision prescribing fatal consequences for filing beyond that date, nor any explicit negative prohibition against late filing. 2.16 The Court reasoned that the existence of a late-fee mechanism in Section 47 indicated that the legislative intent was to permit filing of annual returns beyond the prescribed time, subject to payment of late fees, and not to totally preclude late filers. 2.17 Accordingly, the Court held that the pre-amendment framework could not be interpreted so as to bar the filing or consideration of a GSTR-9 furnished after the due date but before the 2023 amendment came into force. Conclusions 2.18 The mandatory prohibition introduced by the amended Section 44(2) with effect from 1 October 2023 was inapplicable to the return filed on 28 August 2023. 2.19 Under the earlier regime, late filing of GSTR-9 was not statutorily barred; it attracted late fee under Section 47 but did not render the return invalid or incapable of consideration. 2.20 The appellate authority was therefore required to consider the GSTR-9 filed by the petitioners and could not reject or disregard it on the ground of delay under Section 44(2). Issue 3: Precedential value of the 'Ankit Kumar Agarwal' decision Legal framework (as discussed) 2.21 The Court considered the Division Bench judgment referred to as 'Ankit Kumar Agarwal' and the observation therein that the order should not be treated as a precedent. Interpretation and reasoning 2.22 The State argued that, in view of the express observation of the Division Bench, that decision could not be relied upon as a precedent. 2.23 The Court accepted that the observation of the Division Bench, that its order should not be treated as precedent, was binding, and therefore that judgment could not be used as a binding authority. Conclusions 2.24 The Court declined to treat the 'Ankit Kumar Agarwal' decision as a precedent and proceeded to decide the matter independently on first principles, without relying on that case. Issue 4: Consequential relief and remand Interpretation and reasoning 2.25 Having held that (a) the GSTR-9 filed prior to 1 October 2023 could not be rejected as barred by Section 44(2), and (b) ignoring unavailed CESS ITC and the disclosures/payment reflected in GSTR-9 would offend the spirit of Article 265, the Court found the appellate order legally unsustainable. 2.26 The Court emphasised that the appellate authority itself had accepted absence of wilful misstatement/suppression and converted the matter from Section 74 to Section 73, yet failed to give due regard to the annual return and alleged differential payment, warranting fresh examination. Conclusions 2.27 The impugned appellate order was set aside. 2.28 The matter was remanded to the appellate authority to consider the appeal afresh, in accordance with law, after giving due regard to Form GSTR-9, the claim of unavailed CESS ITC on inward supplies, the payment of differential CESS, and the implications of Article 265. 2.29 The writ petition was disposed of with no order as to costs.