Prabha Energy Private Limited Vs. The State of Jharkhand

The petitioner-company, registered under the Goods and Services Tax Act, 2017 (JGST Act), underwent an inspection on December 1st, 2018, conducted by the Assistant Commissioner of Commercial Taxes. Subsequently, they were requested to provide a set of documents before the Deputy Commissioner of Sales Tax on December 4th, 2018, under Section 71 of the JGST Act. The inspection report is attached as Annexure-3. The petitioner alleges that they furnished relevant documents such as the purchase register, invoices, vendor-wise details of GST credit for the period from July 1st, 2017 to October 31st, 2018, and the stock register for the financial years 2017-18 and 2018-19.

However, the petitioner asserts that as per their agreement with ONGC and IOCL, the project they executed was still in the stage of installation/erection/commission as of July 19th, 2019, and thus no revenue had been generated by that date. Despite this, the petitioner received a summary of a show cause notice under GST DRC-01/GST DRC-02, alleging the availment of excess Input Tax Credit (ITC) for the period from July 2017 to September 2018, proposing tax, interest, and penalties amounting to Rs. 1.09 crores. Additionally, the petitioner’s returns were subjected to scrutiny, and GST ASMT-10 was issued for the period from April 2018 to March 2019, alleging a mismatch of GSTR-3B and GSTR-2A.

Subsequently, the petitioner was surprised to receive a summary of the order under GST DRC-07 for the period from July 2017 to September 2018. The petitioner filed an application for rectification on September 28th, 2019, under Section 161 of the Act of 2017 and submitted reconciliation statements for the period from July 1st, 2017, to September 30th, 2018, which showed an amount of Rs. 4.06 lakhs standing towards ITC in favor of the petitioner. According to the petitioner, the reconciliation statements indicate no difference, mismatch, or excess availment of ITC.

The grievance of the petitioner is that no order has been passed on the rectification application to date, while an amount of Rs. 74.20 lakhs of ITC remains blocked in its Electronic Credit Ledger since February 16th, 2020, much beyond the one-year period prescribed under Rule 86A of the JGST Act, 2017.

In their plea, the petitioner has raised several grounds, arguing that the writ petition is maintainable due to the violation of principles of natural justice and the failure to follow the prescribed procedure before passing an adverse order imposing tax, interest, and penalty under Section 73 of the JGST Act. They cite the case of M/s NKAS Service Pvt. Ltd. Vs. State of Jharkhand, W.P.T 2444 of 2021, emphasizing the necessity of a proper show cause notice before initiating proceedings.

The petitioner also contends that if the respondents scrutinized the returns under Section 61 of the JGST Act and issued ASMT-10 showing discrepancies, the petitioner should have been given the statutory period to rectify such discrepancies under Section 161 of the JGST Act. However, the respondents have kept the rectification application pending and blocked the ITC in the Electronic Credit Ledger for over a year.

Consequently, the petitioner requests the summary of the order contained in GST DRC-07 to be quashed, and the respondents are urged to unblock the ITC in the Electronic Credit Ledger. Additionally, they ask for the rectification of discrepancies as per the reconciliation statements provided by the petitioner. If the rectification leads to an adverse order, the petitioner seeks the liberty to appeal before the appellate authority under Section 107 of the JGST Act.

In a legal proceeding, the learned counsel representing the respondent, Mr. Darshana Poddar Mishra, argues that the tax department has adhered to the prescribed legal procedures before imposing taxes, interest, and penalties on the petitioner. It’s highlighted that the petitioner participated in the proceedings before the Assessing Officer, as evidenced by the order sheets, yet failed to file an appeal within the three-month period following the impugned order. The limitation for appealing against the order under Section 73 of the Act had lapsed before the lockdown began, making the petitioner ineligible for relaxation of the limitation period as per the Supreme Court’s directives in Suo Motu Writ Petition (Civil) No(s). 3/2020 and subsequent orders.

However, the respondent’s counsel asserts that the application for rectification is not maintainable, as it seeks a review under Section 161 rather than correction of errors apparent on the record. Furthermore, it’s argued that the six-month period for deciding on rectification applications has elapsed, rendering the respondent unable to act on the application as per the Act’s provisions.

Upon examination of the respondent’s counsel’s submissions, it’s noted that the rectification application was submitted by the petitioner before the lockdown, and the six-month period stipulated under Section 161 would have ended before the lockdown commenced. Moreover, the Supreme Court, through various orders, extended the period of limitation due to the COVID-19 pandemic, including the period relevant to the petitioner’s case.

The orders by the Supreme Court, including those dated March 23, 2020, and April 27, 2021, extended the limitation period until further notice due to the challenges posed by the pandemic. The extension was further prolonged until February 28, 2022, encompassing not only the time for filing suits or appeals but also the period for terminating proceedings. Hence, the delay in deciding the petitioner’s application cannot be attributed to any fault on their part, and the respondents cannot benefit from their own omission.

In summary, the learned counsel for the respondent argues against the maintainability of the petitioner’s rectification application based on procedural grounds. However, it is highlighted that the delay in deciding the application is not the fault of the petitioner, and the period for rectification was extended by the Supreme Court due to the pandemic, making the application viable for consideration despite the expiration of the statutory six-month period.

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