Unity OOH Media Solutions Pvt Ltd vs Deputy State Tax Officer (Addl. Charge)

The present writ petition has been filed to challenge Ext.P2 assessment order. The petitioner, an assessee under the provisions of the GST / CGST Act, 2017 (referred to as “the Act”), had filed GSTR-1 and GSTR-3B returns for the period from July 2017 to March 2018, covering the financial year 2017-2018. The petitioner claimed input tax credit (ITC) for the tax period based on the purchase of goods from registered dealers, as per the legal requirements, through the GSTIN online portal. Despite fulfilling these obligations, the petitioner was issued notices from the GSTIN portal but could not file a reply to these notices. Consequently, in the absence of a reply to the show cause notices and without a personal hearing, the first respondent issued the assessment order in Ext.P2. This order allowed a certain amount of ITC as claimed in Ext.P1 return by the petitioner for the assessment year 2017-2018 but rejected a significant portion of the ITC claim. The sole reason for denying the ITC in Ext.P2 order was that although the petitioner had filed GSTR-1 and GSTR-3B within the extended timeframe, certain suppliers had not filed their GSTR-1 before the due date of 30.04.2019. As a result, the entire ITC claim was rejected under Section 16(4) of the Act.

Learned counsel for the petitioner argues that the petitioner did not have an opportunity to represent his case before the first respondent due to the lack of access to the notices and initial difficulties in understanding the implementation of the GST, which was a new regime at the time. Many taxpayers, including the petitioner, struggled to access the GST portal, leading to an inability to file a reply. Consequently, without a proper hearing, the impugned order was passed, denying a significant portion of the ITC claim. The petitioner contends that this denial was unjust, particularly given the circumstances and challenges faced during the initial implementation of the GST system. The petitioner’s inability to access the portal and respond to the notices was not due to negligence but rather due to the systemic issues and complexities associated with the new tax regime. The petitioner seeks relief from the court to set aside the Ext.P2 assessment order and grant a fair hearing to present his case adequately. The petitioner argues that the assessment order was passed without due consideration of the facts and circumstances, resulting in an erroneous denial of the rightful ITC claim. The petitioner emphasizes that the rejection of ITC solely based on the suppliers’ failure to file GSTR-1 by the due date is overly harsh and unjust, particularly when the petitioner had complied with his filing obligations within the extended timeframes provided by the GST authorities. The petitioner urges the court to intervene and rectify the procedural and substantive errors in the assessment process to ensure justice and fairness in the adjudication of his tax liabilities under the GST regime.

Learned counsel for the petitioner also placed reliance on the judgment of this court in WP(C) No. 30660 of 2023 [M/s Henna Medicals Bus Stand Road vs State Tax Officer], where the court allowed the writ petition, drawing on paragraph 8 of the judgment in Diya Agencies v. The State Tax Officer dated 12.09.2023 in WP(C) No. 29769/203. Paragraph 8 of Diya Agencies reads as follows: “In view thereof, I find that the impugned Exhibit P-1 assessment order, so far as the denial of the input tax credit to the petitioner, is not sustainable, and the matter is remanded back to the Assessing Officer to give an opportunity to the petitioner to substantiate his claim for input tax credit. If, upon examination of the evidence submitted by the petitioner, the assessing officer is satisfied that the claim is bona fide and genuine, the petitioner should be given input tax credit. Merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the input tax credit. The assessing authority is, therefore, directed to give an opportunity to the petitioner to present evidence in support of his claim for input tax credit. The petitioner is directed to appear before the assessing authority within fifteen days with all evidence in his possession to substantiate his claim for a higher input tax credit. After examining the evidence placed by the petitioner/assessee, the assessing authority will pass a fresh order in accordance with the law.”

Considering these facts, the matter is being remitted back to the file of the assessing authority, the first respondent, to reconsider the issue afresh in light of the judgment in Diya Agencies (supra) and to pass a new order after hearing the petitioner. The petitioner is directed to appear before the Assessing Officer on 05.01.2024, with all evidence and the report denying the input tax credit, as referenced in Ext.P1 order. In light of this direction, the writ petition stands allowed, and the impugned Ext.P2 assessment order is hereby set aside. The petitioner, an assessee under the GST / CGST Act, 2017, had diligently filed GSTR-1 and GSTR-3B returns for the period from July 2017 to March 2018, covering the financial year 2017-2018. The petitioner claimed input tax credit for the tax period based on the purchase of goods from registered dealers through the GSTIN online portal, as per legal requirements. Despite fulfilling these obligations, the petitioner received notices from the GSTIN portal but could not file a reply to these notices due to initial difficulties in accessing the GST portal and understanding the new GST regime. As a result, the first respondent issued the assessment order in Ext.P2 without the petitioner’s response to the show cause notices or a personal hearing. This order allowed a portion of the input tax credit claimed in Ext.P1 return but rejected a significant portion of the ITC claim, solely because certain suppliers had not filed their GSTR-1 by the due date of 30.04.2019. Consequently, the entire ITC claim was rejected under Section 16(4) of the Act.

The learned counsel for the petitioner contends that the petitioner did not have a fair opportunity to represent his case before the first respondent due to the lack of access to the notices and initial difficulties with the GST portal. The petitioner’s inability to file a reply was not due to negligence but rather due to the systemic issues and complexities associated with the new tax regime. Without a proper hearing, the impugned order was passed, denying a significant portion of the ITC claim. The petitioner argues that this denial was unjust, especially given the circumstances and challenges faced during the initial implementation of the GST system. The petitioner seeks relief from the court to set aside the Ext.P2 assessment order and to grant a fair hearing to present his case adequately. The petitioner emphasizes that the rejection of ITC solely based on the suppliers’ failure to file GSTR-1 by the due date is overly harsh and unjust, particularly when the petitioner had complied with his filing obligations within the extended timeframes provided by the GST authorities. The petitioner urges the court to intervene and rectify the procedural and substantive errors in the assessment process to ensure justice and fairness in the adjudication of his tax liabilities under the GST regime.

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