Court’s Decision
The Patna High Court refused to adjudicate on disputed factual issues concerning reversal of input tax credit (ITC) under the CGST/BGST Act, 2017, and permitted the petitioner to withdraw the writ petition with liberty to approach the GST Appellate Tribunal under Section 112 of the Act when constituted. The Court also clarified that the petitioner may seek interim protection against recovery by applying to the proper officer, where a stay would be considered automatically on deposit of 10% of the disputed demand
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Facts
The petitioner, a registered dealer, approached the High Court challenging the demand raised by the tax authorities on the ground that recipients of its goods had reversed the input tax credit attributable to goods purportedly returned. Certificates from recipients were annexed to the writ petition to support this claim.
Pursuant to earlier directions of the Court, the State filed a counter affidavit verifying the claims. The adjudicating authority examined the GST returns of the recipients. It was revealed that except for two recipients—M/s A.H. Enterprises and M/s I.I.N. Traders, who reversed ITC of ₹5,274.40 and ₹15,409.00 respectively—none of the other eight recipients reversed the ITC. On the contrary, the returns (GSTR-3B and GSTR-9) showed zero reversal, and in some cases negative figures, proving higher availment of ITC than eligible.
Faced with these findings, the petitioner submitted that such disputes of fact are best decided by the statutory appellate authority and sought permission to withdraw the writ petition to pursue the appellate remedy.
Issues
- Whether the High Court, in exercise of its writ jurisdiction, could adjudicate disputed factual issues relating to ITC reversal by recipients.
- Whether the petitioner could be granted interim protection against coercive recovery pending constitution of the Tribunal.
Petitioner’s Arguments
The petitioner argued that the matter essentially involved factual disputes regarding ITC reversal, and such disputes require detailed adjudication which falls within the jurisdiction of the GST Appellate Tribunal under Section 112 of the CGST/BGST Act. Hence, the writ petition should be permitted to be withdrawn with liberty to avail the appellate remedy.
At the same time, the petitioner pressed for interim relief, requesting that recovery proceedings pursuant to the demand be stayed until the Tribunal is constituted, to prevent undue hardship.
Respondent’s Arguments
The State, through its counsel, opposed the petitioner’s factual assertions and pointed to the counter affidavit showing that except for two recipients, no reversal of ITC had occurred, rendering the certificates annexed to the petition false. It maintained that the High Court was not the appropriate forum to adjudicate such fact-intensive disputes, and the Tribunal was the proper remedy.
On the issue of interim protection, the State submitted that as per statutory provisions, the petitioner can apply for stay before the proper officer, and the stay would be considered automatically upon deposit of 10% of the disputed tax demand.
Analysis of the Law
The Court emphasized that under the CGST/BGST Act, the proper appellate mechanism has been provided under Section 112 before the GST Appellate Tribunal. Disputed questions of fact, especially relating to ITC availment and reversal, cannot be effectively adjudicated in writ proceedings under Article 226.
On interim relief, the Court considered the statutory scheme under which stay is ordinarily granted on deposit of 10% of the demand. The Court held that this mechanism must be followed by the petitioner before the competent authority rather than invoking writ jurisdiction for interim stay.
Precedent Analysis
Although the order does not cite specific precedents, the reasoning aligns with settled jurisprudence that:
- Writ jurisdiction should not be invoked to adjudicate factual disputes (as consistently held by the Supreme Court in cases like Assistant Collector of Central Excise v. Dunlop India Ltd. and State of Maharashtra v. Greatship (India) Ltd.).
- Where a statutory alternative remedy exists, particularly in tax matters, the High Court ordinarily refrains from exercising writ powers unless exceptional circumstances exist.
Here, the Court reinforced these principles, holding that the Tribunal is the correct forum for adjudication.
Court’s Reasoning
The Court recorded that the counter affidavit clearly demonstrated factual disputes regarding ITC reversal. It noted that such questions require evidence and appreciation of records, which is beyond the scope of writ jurisdiction. Recognizing that the petitioner had already conceded to approaching the Tribunal, the Court granted liberty for the same.
On interim relief, the Court clarified that under law, if the petitioner applies before the proper officer for stay on recovery, the application will be considered automatically upon deposit of 10% of the disputed amount. Thus, sufficient statutory protection is available.
Conclusion
The High Court permitted the petitioner to withdraw the writ petition with liberty to file an appeal before the GST Appellate Tribunal once constituted, within limitation. It directed that interim protection can be sought before the proper officer by depositing 10% of the demand. The writ petition was accordingly disposed of.
Implications
This judgment reinforces the principle that writ courts are not the proper forum to resolve disputed questions of fact under GST law, especially regarding ITC transactions. It underscores the importance of exhausting statutory remedies under Section 112 of the CGST/BGST Act.
The ruling also reassures taxpayers that interim relief against recovery is statutorily available, subject to deposit of 10% of the demand, thereby balancing taxpayer interests with revenue protection. The judgment may influence future cases where parties attempt to bypass the Tribunal and approach writ courts directly.
Cases Referred
While the order does not expressly cite judgments, it follows the consistent principle laid down by the Supreme Court that writ jurisdiction should not be used where disputed facts are involved and where statutory appellate remedies exist. The implied reference is to jurisprudence such as Assistant Collector of Central Excise v. Dunlop India Ltd. (1985) and State of Maharashtra v. Greatship (India) Ltd. (2022), which emphasize alternate remedies and limit writ interference.
FAQs
Q1. Can the High Court decide disputes about ITC reversal under GST?
No. The Patna High Court clarified that such fact-intensive disputes must be adjudicated by the GST Appellate Tribunal, not through writ jurisdiction.
Q2. How can a taxpayer obtain stay on recovery during pendency of appeal?
By applying to the proper officer and depositing 10% of the disputed demand, an automatic stay on recovery is considered under law.
Q3. What remedy is available when the GST Tribunal has not been constituted?
The Court allowed withdrawal with liberty to approach the Tribunal once constituted, ensuring taxpayers are not left remediless while recognizing statutory hierarchy.