Taxpayer Can't Be Denied ITC For Merely Filing GST Form Manually If Functionality Issues Are Attributable To Dept: Bombay High Court

Recently, an issue cropped up, where it was emphasized that technicalities created by the Department and not the taxpayer, should not be put forth by the department to defeat the statutory rights and entitlement of the taxpayers.The Bombay High Court ruled that concerned Revenue officials (Respondent) cannot deny the benefits of accrued ITC (input tax credit) to the assessee (Petitioner) only because the prescribed forms were not filed electronically but were filed manually.Just because the GST ITC-02 Form was not available for filing electronically, neither the petitioner nor TDN could be faulted for not filing Form GST ITC-02 electronically on the department's common portal, added the Court. The Division Bench of Justice M.S. Sonak and Justice Jitendra Jain therefore directed the Respondents to consider the manually filed forms by the TDN as expeditiously as possible. However, the Bench clarified that if upon due consideration of manual forms, the Respondents still find that the ITC of Rs.18,30,58,995/- was not due or was wrongly availed of and utilised by the Petitioner, then they are free to pass appropriate order. Facts of the case:The petitioner, engaged in providing internet services, entered into Business Transfer Agreement (BTA) with Tikona Digital Networks (TDN), in which the TDN business was transferred to the petitioner as a going concern. The TDN thereafter approached the jurisdictional AO informing them about the non-availability of Form ITC-02 functionality on the department's common portal. The TDN intended to transfer unutilised credit in its electronic credit ledger on the date of slump sale to the petitioner. However, since Form ITC-02 was not yet available on the GSTIN portal for filing, TDN could not comply with the electronic filing requirement of the said form.During second half of the year 2017, the petitioner had availed ITC to the tune of Rs.18.30 crores. Since the Respondents did not make available electronical facility of filing Form GST ITC–02, the petitioner filed the form manually. After almost six years, the petitioner received a notice alleging that petitioner had wrongly availed & utilised ITC of Rs.18 crores, simply because petitioner had manually filed the forms. Hence, the petitioner approached the High Court challenging the notice as well as the demand imposed by the Respondent Department. Observations by High Court:The Bench observed that the only allegation in the show cause notice is about non-filing Form GST ITC-02 electronically on the department's common portal.However, the Bench opined that such allegations would sustain if the Department's common portal was fully functional and TDN or the petitioners could file Form GST ITC-02 electronically on the common portal. The TDN or the petitioner could not file Form GST ITC-02 on the department's common portal during the relevant period because of the functionality issues relating to such a common portal, accepted the Bench. Thus, the Bench observed that once it is admitted that Form GST ITC-02 was not filed electronically on the department's common portal because it was not fully functional to generate and accept the Forms, then issuance of show cause notice amounts to exercise of excessive jurisdiction under the CGST Act and the Rules. The Bench pointed that only after CA's certificate was filed, certifying that the transfer of business from TDN to the Petitioner was done with the specific provision for the transfer of liabilities, the petitioner availed the ITC. If the Respondents had any issues with the manual filing of Form GST ITC-02 or GSTR-3B, they could have processed the forms and decided on the issue of ITC, added the Bench. Thus, the Bench emphasized that the Respondents could not have avoided processing the manual return on the specious plea that Section 18(3) & Rule 41(1) of the CGST Act and Rules recognise only electronic filing and not manual filing. In similar instance, the Bench found that Allahabad High Court after noting that the functionality for filing Form IT-02 was not available on the department's common portal at the relevant time when BTA transferred its business with liabilities to the petitioner, had held that petitioner cannot be deprived of the ITC. Further, the Gujarat High Court, Delhi High Court and Bombay High Court under identical circumstances, held that the action by which the Department had failed to acknowledge and transfer the ITC accruing to the petitioner, was grossly illegal, added the Bench. Thus, highlighting that the Respondents were duty-bound to take cognisance of the decisions of the Allahabad, Gujarat, and Delhi High Courts in dealing with almost identical issues concerning the petitioner, the Bench quashed the show cause notice demanding the ITC, and allowed Assessee's petition.However, the Bench clarified that if the Respondent concludes that the ITC was wrongly availed, the Respondents are free to take appropriate action by following natural justice. Counsel for...

Taxpayer Can't Be Denied ITC For Merely Filing GST Form Manually If Functionality Issues Are Attributable To Dept: Bombay High Court

Pankaj Bajpai

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