Calcutta High Court Stays Demand Order Confirming Payment Reversal Of ITC Due To Cancellation Of Supplier's Registration

The Calcutta High Court stayed the demand order confirming the payment reversal of the ITC due to the cancellation of the supplier's registration.

The bench of Justice Raja Basu Chowdhury has observed that the prima facie case was made by the petitioner/assessee, and there shall be a stay of the demand raised by the proper officer as is reflected in the order, subject to the petitioners' depositing 10% of the disputed tax amount with the GST authorities.

The petitioner/assessee has challenged the order passed under Section 73(9) of the West Bengal/Central Goods and Services Tax Act, 2017. The respondent department has passed the order raising a demand on the petitioner no. 1 on account of the input tax credit (ITC) being availed by the assessee in violation of Section 16(2)(a) on the ground that M/s. Crystolyte Facility Management Pvt. Ltd., with whom the petitioner had signed an agreement, had closed down its business for the financial year 2018-19.

When the writ petition came up for consideration, the Court, by an order, permitted the petitioners to place a copy of the printout obtained from the GST portal showing the status of the return filed by M/s. Crystolyte Facility Management Pvt. Ltd. by way of a supplementary affidavit.

The petitioner filed a supplementary affidavit in court and disclosed the printout from the portal of the GST authorities, which was last updated on June 19, 2024. The GST status of the said M/s. Crystolyte Facility Management Pvt. Ltd. is shown as suo motu cancelled with effect from April 6, 2021. It records that returns in GSTR 3B had been filed by the said M/s. Crystolyte Facility Management Pvt. Ltd. for the tax period 2018–19. It prima facie demonstrated that M/s. Crystolyte Facility Management Pvt. Ltd. had been complying with the provisions of the Act at least up to the tax period of 2018–19.

The petitioner relied on a press release dated May 4, 2018, issued by the Ministry of Finance. It is submitted that it has been clarified that there shall be no automatic reversal of input tax credit from the buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller; however, reversal of credit from the buyer shall also be an option available with the revenue authorities to address exceptional situations like a missing dealer, the closure of business by a supplier, or the supplier not having adequate assets, etc. It would be apparent that at the relevant point in time, M/s. Crystolyte Facility Management Pvt. Ltd. had filed its return. No steps have been taken by the respondents to seek recovery of tax, if any, from the aforesaid M/s Crystolyte Facility Management Pvt. Ltd.

The department contended that the petitioners have an efficacious alternative remedy in the form of an appeal. The assessee has approached the high court without exhausting their alternative remedy.

The court stayed the demand on the condition that it deposit 10% of the disputed tax amount with the GST authorities.

Counsel For Petitioner: Ankit Kanodia

Counsel For Respondent: Anirban Ray

Case Title: M/s. Asian Hotels (East) Ltd. & Anr. Versus The Deputy Commissioner of State Tax & Ors.

Case No.: WPA 13542 of 2024

Click Here To Read The Order