Assessee Ought To Have Waited For Relevant Form To Go Live On GST Portal Instead Of Making Illegal Adjustment: Allahabad High Court

The Allahabad High Court has held that the assessee ought to have waited for the relevant form to go live on the GST portal instead of making an illegal adjustment.

The bench of Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava has observed that it was incumbent upon the petitioner to have raised a proper grievance on the GST portal help-desk and ought to have waited for the relevant Form to go live on the GST portal instead of making illegal adjustments by use of the Form GSTR-3B of the transferor and the transferee company. A mere shortage of working capital cannot be an excuse to bypass the legal procedure laid down under the law.

The petitioner/assessee is a registered Company engaged in providing internet service across India from various states, including the State of U.P. The petitioner entered into a Business Transfer Agreement with Tikona Digital Network (TDA), under which the business was transferred to the petitioner. TDA had accumulated an ITS balance of more than Rs. 3,131,68,997, which was unutilized.

The petitioner, being entitled to transfer the ITC remaining unutilized under Section 18(3) of the GST Act, made an attempt to transfer it as per the procedure prescribed under Rule 41 of the CGST Rules, 2017.

The Rules provide that the Transferor shall file GST ITC-02 electronically on the common portal along with a request for transfer of ITC remaining unutilized in his Electronic Credit Ledger (ECL) to the transferee.

The assessee contended that the functionality for filing Form IT-02 was not available on the common portal.

The non-availability was communicated to the jurisdictional Assessing Authority. No response was received. Faced with serious working capital issues, the petitioner manually accepted and availed the ITC of Rs. 3,13,68,997.

After a lapse of five years, the petitioner was served with a show cause notice requiring the petitioner to serve the differential ITC of Rs. 2,88,35,905.60 along with interest and penalty.

The total ITC available in Form GSTR-2A was Rs. 2,22,24,921.08, whereas the petitioner availed of the ITC of Rs. 5,10,60,826.68. The petitioner submitted a detailed reply against the show cause with a prayer to withdraw the show cause notice.

The assessee alleged that the department, without considering the reply of the petitioner, had proceeded to pass the order confirming the demand.

The court noted that the stand of the department in rejecting the claim of the assessee in the wake of the fact that the GST common portal was not online cannot be justified.

The court set aside the order with liberty to the department to pass a fresh order taking into consideration the objections of the petitioner and also affording its opportunity of hearing, strictly in accordance with law.

Case Title: M/S Tikona Infinet Private Limited vs. State of U.P. and Another [Writ Tax No. - 859 Of 2023]

Case Citation: 2023 LiveLaw (AB) 242

Date: 25.7.2023

Counsel For Petitioner: Nishant Mishra,Vedika Nath

Counsel For Respondent: C.S.C.

Click Here To Read The Order