Shriram City Union Finance Limited VS Principal Commissioner of GST

In a legal proceeding, Mr. R. Sivaraman, representing the petitioner, and Mr. T. Pramod Kumar Chopda, as Senior Standing Counsel for the respondents, engaged in arguments concerning a show cause notice dated 26th November 2019. This notice was issued by R2, the Assistant Commissioner of GST and Central Excise, invoking Section 73(1) of the Central Goods and Services Tax Act, 2017 (CGST Act). The essence of the notice pertains to the input tax credit (ITC) carried forward by the petitioner under TRAN-1, transitioning from the era of Service Tax governed by the Finance Act, 1994, to the era of GST.

Mr. R. Sivaraman, representing the petitioner, and Mr. T. Pramod Kumar Chopda, the Senior Standing Counsel for the respondents, were involved in a legal matter concerning a show cause notice issued by R2, the Assistant Commissioner of GST and Central Excise, dated 26th November 2019. The notice, issued under Section 73(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), pertains to the input tax credit (ITC) carried forward by the petitioner in TRAN-1 from the Service Tax era under the Finance Act, 1994, to the GST era.

Mr. Sivaraman’s argument primarily focuses on the wording used in the show cause notice. He contends that the notice explicitly indicates the intention of the Officer to recover the input tax credit, despite the fact that the petitioner has not utilized this credit to offset any tax liability. The credit continues to be reflected in the petitioner’s credit ledger without being set off against any tax liability. Therefore, Mr. Sivaraman argues, there is no basis for recovery as the credit remains unutilized and is maintained solely as a credit in the ledger.

The crux of Mr. Sivaraman’s defense seems to hinge on the interpretation of the show cause notice and the legal position regarding the recovery of input tax credit under the GST framework. His argument underscores that until the credit is actually set off against a tax liability, there should be no obligation to recover or adjust it, as it remains in the form of an unused credit in the petitioner’s account.

This legal debate is critical in determining whether the show cause notice was issued correctly and whether the actions proposed therein are legally tenable under the provisions of the CGST Act.

Mr. R. Sivaraman, representing the petitioner, and Mr. T. Pramod Kumar Chopda, the learned Senior Standing Counsel for the respondents, presented arguments in a case concerning a show cause notice dated 26th November 2019 issued by R2, the Assistant Commissioner of GST and Central Excise. The notice, issued under Section 73(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), pertains to the input tax credit (ITC) carried forward by the petitioner in TRAN-1 from the era of Service Tax under the Finance Act, 1994 to the GST regime.

Mr. Sivaraman’s contention primarily revolves around the wording of the show cause notice. He asserts that the language used clearly indicates the officer’s intent to recover the input tax credit, despite it not having been set off by the petitioner and still remaining in the credit ledger. According to him, since the credit has not been utilized against any tax liability, there should be no question of recovery at this stage.

On the other hand, Mr. Chopda argues contrarily that the challenge presented in the writ petition is premature. He points out that the petitioner is contesting only a show cause notice which merely calls for a reply, a procedural step that the petitioner could have fulfilled. He emphasizes that there is no requirement for a quantified demand order to precede the issuance of the show cause notice, as the officer’s intention is precisely to assess and quantify any potential demand through this process. Regarding the availment of credit, Mr. Chopda asserts that such issues typically arise during the assessment proceedings initiated by the officer, making it premature to consider these aspects at the stage of issuing a show cause notice.

In summary, the case centers on whether the show cause notice prematurely demands recovery of input tax credit that has not been utilized, versus the procedural correctness of issuing such a notice to begin assessment proceedings. The court will likely need to determine whether the notice complies with procedural norms and whether it is premature to demand recovery of the credit at this stage of the proceedings.

The case revolves around a writ petition challenging a show cause notice issued on 26th November 2019 by the Assistant Commissioner of GST and Central Excise (referred to as R2). The notice was issued under Section 73(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), concerning the input tax credit (ITC) carried forward by the petitioner in TRAN-1 from the era of Service Tax under the Finance Act, 1994 to the GST era.

Mr. R. Sivaraman, counsel for the petitioner, argues that the language used in the show cause notice suggests an intention to recover input tax credit that has not been utilized by the petitioner and remains only as a credit in their ledger. He asserts that since this credit has not been set off against any tax liability, there should be no question of recovery at this stage.

In contrast, Mr. T. Pramod Kumar Chopda, Senior Standing Counsel for the respondents, counters that the writ petition is premature because it challenges only a show cause notice which merely calls upon the petitioner to respond. According to Mr. Chopda, no quantification of the demand has been made yet, and the officer’s intent is to assess and determine the demand through the notice. He argues that questions regarding the eligibility and utilization of credit will be relevant only once formal assessment proceedings are initiated.

After hearing both sides, the court opines that the writ petition appears premature, aligning with Mr. Chopda’s argument. The court notes that the language of the notice may suggest recovery, but recovery itself cannot be effected through a show cause notice alone. The officer’s mention of the petitioner not being eligible to carry forward credit to their electronic credit ledger, despite it being reflected in their return, raises concerns that need clarification in subsequent proceedings.

Therefore, while acknowledging the concerns raised by Mr. Sivaraman about the language and intent of the notice, the court concludes that the challenge to the show cause notice is premature since no final determination or order quantifying the demand has been made yet. The matter of whether the petitioner can legitimately retain the carried-forward credit will be appropriately addressed when assessment proceedings are formally initiated by the officer.

In a legal proceeding heard by the court, Mr. R. Sivaraman, representing the petitioner, and Mr. T. Pramod Kumar Chopda, representing the respondents, presented their arguments concerning a show cause notice issued by the Assistant Commissioner of GST and Central Excise (R2). The notice, dated 26th November 2019, was issued under Section 73(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), addressing the issue of input tax credit (ITC) carried forward by the petitioner in TRAN-1 from the era of Service Tax under the Finance Act, 1994 to the GST era.

Mr. Sivaraman’s argument focused on the wording of the show cause notice, contending that it erroneously suggested recovery of input tax credit that had not been utilized by the petitioner and was still reflected in their credit ledger. He emphasized that since the credit had not been set off against any tax liability, recovery was premature and unjustified.

In contrast, Mr. Chopda argued that the writ petition challenging the show cause notice was premature because it merely required the petitioner to respond with a reply, which could resolve the issue. He asserted that the issuance of a quantifying order for demand was not a prerequisite before issuing the show cause notice, as the purpose of the notice was to initiate proceedings for such determination.

After hearing both counsels, the court concluded that the writ petition was premature, concurring with Mr. Chopda’s view. The court acknowledged that while the language of the notice might suggest recovery, such actions could not be enforced under a show cause notice alone. The court noted that the notice should ideally have used the term ‘reversal’ instead of ‘recovery’ at this initial stage.

However, the court declined to interfere further at this stage, noting that the notice primarily aimed to question the validity of the ITC carried forward, a matter to be examined during the assessment proceedings initiated by the notice itself. The court emphasized that the actual availment of credit was a factual matter to be determined during the assessment process by the competent authorities.

In summary, while acknowledging the potential ambiguity in the notice’s language, the court decided not to intervene prematurely, leaving the detailed examination of facts and assessment procedures to be conducted by the authorities as per the show cause notice issued.

The case revolves around a writ petition where Mr. R. Sivaraman, representing the petitioner, challenges a show cause notice issued on 26th November 2019 by R2, the Assistant Commissioner of GST and Central Excise. This notice was issued under Section 73(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), focusing on the input tax credit (ITC) carried forward by the petitioner from the Service Tax era under the Finance Act, 1994 to the GST era.

Mr. Sivaraman argues that the language used in the show cause notice indicates an intention to recover the ITC that hasn’t been utilized by the petitioner and still remains in their credit ledger. He asserts that since the credit hasn’t been set off against any tax liability, there should be no question of recovery at this stage.

In contrast, Mr. T. Pramod Kumar Chopda, representing the respondents, contends that the writ petition is premature because it challenges only a show cause notice that requires the petitioner to respond. He argues that there’s no need for a quantified demand order prior to issuing such a notice, as the officer intends to determine the demand through this process. He suggests that the question of whether the ITC was correctly availed can only be addressed once assessment proceedings are initiated.

After hearing both counsels, the court opines that the writ petition is indeed premature, agreeing with Mr. Chopda’s argument. The court acknowledges the wording of the notice, which mentions ‘recovery’ of credit, though it notes that ‘reversal’ would have been a more appropriate term at this preliminary stage. However, the court declines to interfere at this point, emphasizing that the veracity of the ITC availed should be determined during the assessment proceedings under the show cause notice.

The notice itself reveals that the Audit Department of GST had verified Form TRAN-1, highlighting discrepancies in availing Cenvat credit related to various services, such as investments, food, accommodation, travels, and registry operations. These discrepancies, including availing credits on exempted avenues, form the core of the issues raised in the notice.

In conclusion, the court decides not to intervene at this preliminary stage, leaving the assessment of factual matters regarding the availed credits to be addressed through the ongoing proceedings initiated by the show cause notice.

In a legal context, Mr. R. Sivaraman, representing the petitioner, challenged a show cause notice dated 26th November 2019 issued by R2, the Assistant Commissioner of GST and Central Excise. This notice, issued under Section 73(1) of the CGST Act, pertained to the petitioner’s carrying forward of input tax credit (ITC) from the era of Service Tax under the Finance Act, 1994 to the GST regime.

Mr. Sivaraman argued that the language of the show cause notice clearly indicated an intention to recover ITC that had not yet been utilized by the petitioner against their tax liability. He contended that since the credit remained unutilized in the credit ledger, recovery was premature and improper.

On the other hand, Mr. T. Pramod Kumar Chopda, Senior Standing Counsel for the respondents, countered that the writ petition challenging the show cause notice was premature. He argued that the notice merely called upon the petitioner to respond, and no final decision or quantification of demand had been made. He emphasized that the legality of the ITC availed would only be determined in subsequent assessment proceedings.

After hearing both counsels, the court found merit in Mr. Chopda’s argument regarding the prematurity of the writ petition. While acknowledging that the language of the notice might suggest premature recovery actions, the court clarified that such actions could not be taken at the show cause notice stage. The court noted that the proper term should have been ‘reversal’ rather than ‘recovery’ in the notice.

The court declined to interfere with the proceedings at this stage, stating that the veracity of the carried-forward ITC and its legality should be examined during the assessment proceedings initiated by the show cause notice. The notice itself indicated concerns over various types of services for which Cenvat credit had been availed, including services related to investments, food, accommodation, travels, and other specified services.

In conclusion, the court dismissed the writ petition as premature but directed the petitioner to submit objections regarding the proposed reversal of ITC within four weeks. It stipulated that the objections would be duly considered, and orders would be passed in accordance with the law within the same timeframe. The connected miscellaneous petition was closed with no costs imposed.

Download PDF:

For Reference Visit:

Read Another Case Law:

GST Case law: