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2026 (4) TMI 784
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....g the Order-in-Original dated 03.02.2025 and Order dated 04.02.2025 under Section 74 read with Summary of the Order dated 04.02.2025 in Form DRC-07, passed by the GST and Central Excise, Angul-I Range (Annexures-5 and 6) for the Financial Year 2017-18 covering tax periods July, 2017 to March, 2018, whereby and whereunder not only tax equivalent to input tax credit, which had already been reversed in the subsequent returns, but also interest thereon under Section 50 is levied and penalty imposed by way of initiating proceeding under Section 74 of the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act, 2017, in connection with Summary Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 (Annexure-3), by way of filing petition being W.P.(C) No. 12682 of 2025, the petitioner craves indulgence of this Court by exercising power under Articles 226 and 227 of the Constitution of India. 1.1. Assailing the Order-in-Original dated 04.02.2025 passed under Section 74 read with Summary of the Order dated 05.02.2025 in Form DRC-07, passed by the GST and Central Excise, Angul-I Range (Annexures-6 and 7) for the Financial Y....
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....3B for the month of June, 2024 for an amount of Rs. 1,75,128/. Hence, the petitioner was not beneficiary of the impugned transactions. It was also objected to therein that since the Electronic Credit Ledger had more credit balance than the alleged amount of input tax credit availed or utilised, payment of interest under Section 50 of the GST Act does not arise. In view of the retrospective amendment made in Section 50 of the GST Act with effect from 01.07.2017, interest is chargeable only on ITC wrongly availed and utilised, not just on wrongly availed. 3.2. The Superintendent (Anti-Evasion), GST and Central Excise of Rourkela Commissionerate ("Adjudicating Authority", for short) issued Summary of Show Cause Notice dated 26.07.2024 in Form GST DRC-01 enclosing therewith Demand-cum-Show Cause Notice dated 26.07.2024 (for convenience be referred to as "SCN") indicating exercise of power under Section 74, Section 50 of the GST Act read with Section 20 of the Integrated Goods and Services Tax Act, 2017. Raising objection that no Show Cause Notice in Form GST DRC-01A (pre-Show Cause Notice) required under Rule 142(1A) of the Central Goods and Services Tax Rules, 2017 being issued, in....
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.... Sri Mukesh Agarwal, learned Senior Standing Counsel for the opposite parties. 4.3. Hearing being concluded, the matter stood reserved for preparation and pronouncement of Judgment/Order. Arguments and submissions: 5. Sri Rudra Prasad Kar, learned Senior Advocate appearing along with Sri Asit Kumar Dash, learned Advocate submitted that the Adjudicating Authority exceeded jurisdiction in invoking provisions of Section 74 for levying tax equivalent to input tax credit stated to have been voluntarily reversed in the subsequent returns in Form GSTR-3B and interest under Section 50 and imposing penalty under Section 74. The provisions of Section 74 for levying interest under Section 50 and penalty under Section 74 cannot be invoked even for the purpose of non-payment of Goods and Services Tax, in absence of any material on record with respect to specific element of fraud or wilful misstatement or suppression of facts in order to evade tax. It is emphatically submitted that only in the cases where the investigation indicates that there is material evidence of fraud or wilful misstatement or suppression of fact to evade tax on the part of the taxpayer provisions of Section 74 of ....
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....ability to pay interest under Section 50 of the GST Act would not arise on the facts and in the circumstances of the case. Therefore, the ingredients for exercise of power to initiate proceeding under Section 74 being absent, the imposition of penalty therefor also would be uncalled for. 6. The learned Senior Standing Counsel(s) being present did not dispute the facts as unfurled in the writ petition that the petitioner had reversed the input tax credit to the tune of Rs. 4,39,970/- as requested in Letter dated 12.07.2024 of the Superintendent (Anti-Evasion), CGST and Central Excise, Rourkela Commissionerate, but vociferously submitted that the petitioner cannot be allowed to circumvent efficacious remedy available under GST Act and having approached this Court directly beseeching to invoke extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution of India, the writ petition deserves to be dismissed. 6.1. The learned Senior Standing Counsel emphasised on the point that it is unknown whether the input tax credit stated to have been reversed voluntarily is relatable to the allegation made in Summary of Show Cause Notice read with Demand Show Cause ....
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....xesia Traders (herein referred to as M/s. AT (having GSTIN: 19APGB1744M1ZS, who has been, upon verification found to be non-existent and fictitious firm. Therefore, it appears, that the noticee is required to pay/ reverse input tax credit equivalent to Rs. 4,39,970/- (IGST: Rs. 4,39,970/-) availed and utilised on the strength of paper tax invoices issued by the aforesaid non-existent for the tax periods August, 2017 to December, 2017, in terms of provision of Section 74(1) of CGST Act along with interest payable thereon under Section 50 of CGST Act and OGST Act and the said taxpayer is also liable for penal action under Section 74 of the said Act read with Section 20 of the Integrated Goods and Services Tax Act." 8.2. In Demand Show Cause Notice dated 26.07.2024, following discussions find place: "5.0 Discussions, findings and outcome of the investigation: 5.1 From the facts, as mentioned at Para-2 supra, it appears that M/s. AT is a fake/bogus firm, which was registered under GST for the purpose of availing and passing on fake/ineligible ITC without any underlying supply of goods or services or both. It also appears that a non-existent firm cannot supply any g....
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....GSTIN: 21AANPN1032G2Z6), are also informed that in terms of Section 74(8) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017, where tax and interest is paid within a period of thirty days of the date of service of notice under sub-section (1) of Section 74, the penalty payable shall be twenty five percent (25%) of such tax and proceedings in respect of such GST, interest and penalty shall be deemed to be concluded provided the said reduced penalty is also paid within the said thirty (30) days. ***" 8.3. As against such notice as aforesaid, by furnishing a written reply dated 30.01.2025 (Annexure-4) the petitioner intimated as follows: "In the notice, your goodself has requested to reverse the ITC of Rs. 4,39,970/- availed from M/s. Auxesia Traders, GSTIN: 19APGPB1744M1ZS. Important to mention here that, in order to avoid litigation and buy peace of mind, the noticee has suo motu reversed the entire input tax credit of (IGST) Rs. 4,39,970/- (GSTR-3B for the month of April 2024 of Rs. 2,64,342/-, GSTR-3B for the month of June 2024 of Rs. 1,75,128/). Hence the noticee is not beneficiary of the impugned transaction. Copy of the GSTR 3B are attached. ....
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....I have carefully gone through the case records, including the allegations contained in the impugned SCN and the reply furnished by the Noticee. I find that in the instant case, the reply to the SCN submitted by the Noticee is not satisfactory as the Noticee mentioned that he has Suo-motto reversed the ITC of Rs. 4,39,970/- (GSTR-3B for the months of April 2024 of Rs. 2,64,342/- and June 2024 of Rs. 1,75,128/- respectively). First of all, the Noticee did not submit any document that ascertains that the ITC reversed by GSTR-3B is the same as demanded from them. Further, on verifying the GSTR-3B return for the month of April-2024 it was found that no ITC was reversed through that return hence the reply submitted by the Noticee is not accepted. Moreover, as per Rule 142 of the CGST Act 2017, the taxpayers shall make payments towards tax, interest, penalty, and other amounts before or after the issuance of a show-cause notice by Form GST DRC-03. Hence the ITC reversed in GSTR-3B would not be taken into consideration. 6.2 The allegation in the impugned SCN is that the Noticee has contravened the provisions of Section 16 of the CGST, 2017 (hereinafter referred to as the Act) read....
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....th section 20 of the IGST Act, 2017. Therefore, the Noticee is liable to pay interest in compliance with Section 50 of CGST Act, 2017 read with section 20 of the IGST Act, 2017." 8.5. It is transparent from a close scrutiny of returns in Form GSTR-3B as enclosed with the writ petition at Annexure-2 series as broad daylight that the finding of fact of the Superintendent (Anti-Evasion) is fallacious and cannot be countenanced. The return in Form GSTR-3B for the month of April in the year 2023-24 reveals as follows: "Year 2023-24 Period April *** 4. Eligible ITC Details Integrated tax Central tax State/ UT tax Cess * * * * * B. ITC Reversed (1) As per Rules 38, 42 and 43 of CGST Rules and Section 17(5) 264342.00 0.00 0.00 0.00 (2) Others 0.00 0.00 0.00 0.00 C. Net ITC available (A-B) -264342.00 192583.88 192583.88 0.00 The return in Form GSTR-3B for the month of June in the year 2024-25 reveals as follows: "Year 2024-25 Period June *** 4. Eligible ITC Details Integrated ....
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....nference or presumption or assumption can be deduced that mere availability of balance in the Electronic Credit Ledger would lead to suggest there was utilization. 8.9. Merely because the supplier is found to be non-existent as indicated in the Alert Notice of the DGGI, the Adjudicating Authority has jumped to the conclusion that by dint of the bogus/fake invoices the petitioner has availed the input tax credit. From the given facts it emanates that the input tax credit in question has been claimed by the petitioner on account of transactions of supply made from outside this State. Obviously such goods could not move in absence of e-waybill which is generated from the authority of the Goods and Services Tax Organisation. It is not the case of the Revenue that the e-waybills were not utilised by the petitioner for receiving the supplies from alleged supplier. No material is brought on record by the Revenue that there was absence of waybills with respect to alleged invoices. Furthermore, the Order-in-Original is silent about the period since when the supplier was found to be non-existent. The Adjudicating Authority has proceeded merely on the basis of Alert Notice of DGGI based on....
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....he conclusion that the petitioner has availed input tax credit wrongfully on the basis of fake/bogus invoices issued by the non-existent supplier. The Adjudicating Authority accepted the information based on admission of an outside source as reflected in the Alert Notice without subjecting it to a critical scrutiny and independent application of mind. Hence, the initiation of proceeding under Section 74 for Financial Year, 2017-18 [covering tax periods July, 2017 to December, 2017] solely based on such information does smack tinge of caprice of the Adjudicating Authority. 8.11. Section 74(1) of the GST Act is quoted hereunder: "(1) Where it appears to the Proper Officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount spec....
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....ct to the subject-transactions in question could be said to be fraudulent one having its involvement in the issue of fake/bogus invoices. Nonetheless, the petitioner has shown bona fide by reversing the amount of input tax credit the moment a letter from the Superintendent (Anti-Evasion) was issued bringing such conduct of the supplier to his notice. 8.15. Careful reading of the provisions of Section 73 and Section 74 of the GST Act as extracted hereinabove would lead to show that limitation has been specified for the Adjudicating Authority for proceeding under Section 73(1). From the pleadings it could be discerned that the period so stipulated therein had been elapsed. However, for invocation of power under Section 74(1), the circumstances are spelt out, which in the humble opinion of this Court are absent in the present case. It is emerged from the chronology of events obtained on record that after the period of limitation stipulated in Section 73 is lapsed, the Adjudicating Authority has sought to initiate proceeding under Section 74 by issue of Letter dated 17.07.2024 of the Superintendent (Anti-Evasion). The Show Cause Notice itself indicates that pertaining to transaction....
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....rangement, rather than relying on any singular test. 2.2. Hon'ble Supreme Court in the case of Commissioner of Central Excise, Mumbai Vrs. M/s. Fiat India) Ltd in Civil Appeal 1648-49 of 2004 (2012) 12 SCR 975 has given the following observation: '66. *** Each case depends on its own facts and a close similarity between one case and another is not enough because either a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.' 2.3. It may be relevant to note that there may be multiple types of arrangements in relation to secondment of employees of overseas group company in the Indian entity. In each arrangement, the tax implications may be different, depending upon the specific nature of the contract and other terms and conditions attached to it. Therefore, the decision of the Hon'ble Supreme Court in the NOS judgment should not be applied mechanically in all the cases. Investig....
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....95) 6 SCC 117, in the context of Section 11A of the Central Excise Act, 1944, which is in identical terms with Section 73 of the Finance Act, 1994 was that: 'Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful.' 63. This decision was followed in Uniworth Textiles Vrs. Commissioner of Central Excise, (2013) 9 SCC 753 where it was observed that "(t)he conclusion that mere non-payment of duties is equivalent to collusion or wilful misstatement ....
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....he first Appellate Authority. ***" 8.20. Nevertheless, such a situation does not arise in the instant case. In the case at hand, realising the difficulty on account of alleged non-existence of the supplier, the recipient appears to have chosen to abandon the claim and sought to reverse the input tax credit claimed at the relevant point of time while furnishing returns. The tenor of reply dated 17.07.2024 shows that "in order to buy peace of mind", the petitioner reversed the amount of input tax alleged to have been availed on the basis of fake/bogus invoices issued by the supplier. It is obvious that it would not be in a position to prove the genuineness of the claim as the Directorate General of Goods and Services Tax Intelligence, Kolkata Zonal Unit, has pointed out vide Alert No. 11/2023-24, dated 19.03.2024 that the supplier is non-existent. When the petitioner has reversed the input tax credit and placed on record material to evince such fact, the reference to Rule 36 of the CGST Rules, 2017 made by the Adjudicating Authority to indicate that documents required to be produced were not submitted by the petitioner is redundant, uncalled for and supported by germane reason. By....
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....ronic credit ledger, it does not follow that the assessee concerned who has discharged Outward Tax Liability by paying cash (which he is free to pay in cash in spite of the surplus or excess electronic credit ledger account), can later on ask for swapping of the entries, so as to show the corresponding Outward Tax Liability amount in the electronic cash ledger from where he can take refund. Payment for discharge of Outward Tax Liability by cash or by way of availing of ITC, is a matter of option, which having been exercised by the assessee, cannot be reversed unless the Act and the Rules permit such reversal or swapping of the entries. As a matter of fact, Section 39(9) provides for an express mechanism to correct the error in returns for the month or quarter during which such omission or incorrect particulars have been noticed." 8.22. Examining the contention of the petitioner confronted with the arguments advanced by the Senior Standing Counsel(s) and perusal of documents available on record it emerges that undeniably on detection of error in claim of input tax credit against the allegation of fake/bogus invoices issued by Auxesia Traders (supplier-third party) pursuant to Let....
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....e period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council. ^1[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of Section 39, except where such return is furnished after commencement of any proceedings under Section 73 or Section 74 ^2[or Section 74A] in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.] (2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. ^3[(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall b....
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....(a) the date, on which the return is due to be furnished under Section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or (b) the date of debit in the Electronic Credit Ledger when the balance in the Electronic Credit Ledger falls below the amount of input tax credit wrongly availed, in all other cases." 9.4. Qua the above amendment so made, a Circular No. 192/04/2023-GST [File No. CBIC-20001/5/2023-GST], dated 17.07.2023 was issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes & Customs, GST Policy Wing, clarifying whether interest would be leviable in the event the Electronic Credit Ledger has the balance more than the input tax credit sought to be reversed. The said Circular is reproduced hereunder: "Subject: Clarification on charging of interest under Section 50(3) of the CGST Act, 2017, in cases of wrong availment of IGST credit and reversal thereof. References have been received from trade requesting for clarificat....
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....redit. Thus, in the cases where IGST credit has been wrongly availed and subsequently reversed on a certain date, there will not be any interest liability under sub-section (3) of Section 50 of CGST Act if, during the time period starting from such availment and up to such reversal, the balance of input tax credit (ITC) in the Electronic Credit Ledger, under the heads of IGST, CGST and SGST taken together, has never fallen below the amount of such wrongly availed ITC, even if available balance of IGST credit in electronic credit ledger individually falls below the amount of such wrongly availed IGST credit. However, when the balance of ITC, under the heads of IGST, CGST and SGST of Electronic Credit Ledger taken together, falls below such wrongly availed amount of IGST credit, then it will amount to the utilization of such wrongly availed IGST credit and the extent of utilization will be the extent to which the total balance in Electronic Credit Ledger under heads of IGST, CGST and SGST taken together falls below such amount of wrongly availed IGST credit, and will attract interest as per sub-section (3) of Section 50 of CGST Act, read with Section 20 of Integrated Goods and Ser....
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....nded towards input tax credit (IGST) for the Financial Year 2017-18 (July, 2017 to March, 2018). Notwithstanding the fact that prior to issue of Summary Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 the petitioner had reversed the amount of input tax credit to the tune of Rs. 4,39,970/-, the demand of equal amount is shown in the Order-in-Original. This would tantamount to double taxation which is prohibited under law. As is patent from the said Order, the same amount of Rs. 4,39,970/- has been demanded in order to impose penalty of equal amount, i.e. Rs. 4,39,970/-. On the conspectus of factual position it is ascertainable that the petitioner has voluntarily reversed input tax credit of Rs. 4,39,970/-; and the Adjudicating Authority in the Order-in-Original demanded input tax credit (IGST) of Rs. 4,39,970/-. This apart, he imposed penalty of Rs. 4,39,970/-. In such event the petitioner is subjected to penalty twice for the self-same transaction. Once it is conceded by the Revenue that the amount of input tax credit for a sum of Rs. 4,39,970/- has been reversed, raising demand to the same without giving due credit to such reversal is unethical and without au....