Calcutta High Court stays order confirming cancellation of ITC payment due to cancellation of supplier’s registration

THE Calcutta High Court suspended the formal notice order confirming the cancellation of the ITC payment due to the cancellation of the supplier’s registration.

The bench of Justice Raja Basu Chowdhury observed that a prima facie case has been made out by the applicant/taxable person, and that there will be a stay of the application raised by the proper officer as directed in the order, subject to deposit by the applicants of 10% of the amount of the disputed tax 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 passed the order by framing a claim against the petitioner No. 1 on account of Input Tax Credit (ITC) availed by the assessee in violation of Section 16(2)(a) on the ground that M/s. Crystolyte Facility Management Pvt. Ltd., with which the petitioner had entered into an agreement, had closed down its business for the financial year 2018-19.

When the petition was considered, the court by order permitted the petitioners to file a copy of the printout obtained from the GST portal indicating the status of the return filed by M/s. Crystolyte Facility Management Pvt. Ltd. by way of supplementary affidavit.

The petitioner filed a supplementary affidavit in the court and disclosed the printout of the GST authorities portal, which was last updated on 19th June, 2024. The GST status of the said M/s. Crystolyte Facility Management Pvt. Ltd. is shown to be cancelled ipso jure with effect from 6th April, 2021. It states that returns in GSTR 3B were filed by the said M/s. Crystolyte Facility Management Pvt. Ltd. for the tax period 2018-19. It has been prima facie shown that M/s. Crystolyte Facility Management Pvt. Ltd. had complied with the provisions of the Act at least till the tax period 2018-19.

The petitioner has relied on a press release dated 4th May, 2018 issued by the Ministry of Finance. It has been clarified that there will be no automatic reversal of input tax credit of the purchaser in case of non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery will be made from the seller; however, reversal of the purchaser’s credit will also be an option available with the tax authorities to deal with exceptional situations like missing dealer, closure of business by a supplier or supplier not having sufficient assets etc. It would be obvious that at the relevant time, M/s. Crystolyte Facility Management Pvt. Ltd. had filed its return. No step has been taken by the respondents to seek recovery of tax, if any, from the said M/s. Crystolyte Facility Management Pvt. Ltd.

The Ministry argued that the applicants had an effective alternative remedy in the form of an appeal. The taxpayer appealed to the High Court without exhausting his alternative remedy.

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

Counsel for the applicant: Ankit Kanodia

Defendant’s attorney: Anirban Ray

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

File number: WPA 13542 of 2024

Click here to read the order