Central Goods and Services Tax Act, 2017, Section 140

Transitional arrangements for input tax credit--Reversal of transitional ITC without providing opportunity of hearing to assessee--Violation of principles of natural justice

Conclusion: Where assessee was not given opportunity of hearing before passing the order of reversal of transitional input tax credit, the same was against the principles of natural justice.

Assessee-company went under liquidation. It had transitioned input tax credit from the erstwhile regime to the GST regime by filing Form GST TRAN-1 under section 140 of the CGST Act. Revenue called upon the assessee to show cause as to why the input tax credit availed should not be reversed. The assessee replied thereto, but such reply was not taken into consideration before passing the order of reversal of ITC. Held: The impugned order was issued without hearing the assessee and without considering the contentions advanced by it. Solely with a view to provide another opportunity to the assessee before the original authority, the impugned order was set aside and the matter was remanded to the original authority for re-consideration.

Decision: In favour of assessee by way of remand

IN THE MADRAS HIGH COURT

SENTHILKUMAR RAMAMOORTHY J.

Dharani Sugars & Chemicals Ltd. v. Asstt. Commr. of GST & CE

W.P. No. 9309 of 2024 and W.M.P. No. 10327 of 2024

8 April, 2024

Petitioner by: M. Narasimha Bharathi

Respondent by: Ramesh Kutty

An order in original dated 22-12-2023 is the subject of challenge in this writ petition. The petitioner is a company under liquidation under the Insolvency and Bankruptcy Code, 2016. The said entity had transitioned input tax credit from the erstwhile regime to the GST regime by filing Form GST TRAN-1 dated 24-8-2017 under section 140 of the Central Goods and Services Tax Act, 2017 (the CGST Act). By issuing show cause notice dated 23-3-2021, the petitioner was called upon to show cause as to why the Input Tax Credit availed of by the petitioner should not be reversed. The petitioner replied thereto on 19-4-2021. The impugned order was issued thereafter on 22-12-2023.

2. Learned counsel for the petitioner assails the order on the ground that Explanation 3 to Section 140 of the CGST Act was applied retrospectively to sub-section (1) thereof. He contends that Explanation 3 is not applicable to sub-section (1). In support of this proposition, he relies upon the judgment of the Bombay High Court in Godrej & Boyce MFG. Co. Ltd. v. Union of India and others (2022) 98 GSTR 103 (Bombay). He also relies upon an interim order of the Division Bench of this Court dated 09-8-2023 in W.P.Nos.17727 and 17728 of 2022.

3. Mr. Ramesh Kutty, learned senior standing counsel, accepts notice on behalf of the respondent. By referring to the impugned order, learned senior standing counsel points out that a personal hearing was fixed on 20-12-2023 and that the petitioner herein did not attend the personal hearing and instead called upon the respondent to submit a claim in view of the pending liquidation proceedings. He also referred to the relevant letter dated 18-12-2023 in this regard.

4. Upon considering the above submissions, it is clear that the impugned order was issued without hearing the petitioner and without considering the contentions advanced before this Court by learned counsel for the petitioner. Solely with a view to provide another opportunity to the petitioner to canvass these contentions before the original authority, the order impugned herein calls for interference.

5. Therefore, impugned order dated 22-12-2023 is set aside and the matter is remanded to the original authority for re-consideration. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of receipt of a copy of this order.

6. W.P.No.9309 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.No.10327 of 2024 is closed.