While quashing the proceedings initiated by the GST Department, the Allahabad High Court recently ruled that an incorrect statement, unless made with the knowledge that it was not correct, would not be a ground of wilful misstatement or suppression, and no inference can be drawn if full information has been disclosed without intent to evade payment of tax. Reference was made to the decision of the Apex Court in the case of Continental Foundation Joint Venture Holding, Nathpa, H.P. vs. Commissioner of Central Excise, Chandigarh-I [(2007) 10 SCC 337].
The Court emphasized that the GST regime has been brought in by the Central Government for ease of business in the country, but the revenue officers are bent on acting against the very theme/intent of it. When it was noticed that, under the garb of Section 74 of the UPGST Act, various dealers are being harassed, the Government issued a Circular dated December 13, 2023, specifically stating that proceedings under Section 74 of the Act can be initiated only if there is a fraud or wilful misstatement or suppression of fact to evade payment of tax and not otherwise.
A Single Judge Bench of Justice Piyush Agrawal observed that proceedings under Section 74 of the UPGST Act cannot be initiated once the actual movement of goods as well as payment of tax through the banking channel stands sufficiently established by the GSTR-3B of both the registered dealer/ manufacturer and the supplier.
The information sent by the office of the Pr. Chief Commissioner, Central Intelligence Unit, Central Excise & Central Tax Vadodara Zone, must not have been accepted with closed eyes, and rather shall have been verified by the authority before using the same against the registered dealer, added the Single Judge.
The Bench found that notice under section 74 was issued to the petitioner based on some information received from the office of Pr. Chief Commissioner, Central Intelligence Unit, that Unimax Pharma Chem, from whom purchases have been made by the petitioner, has been wrongly shown. This information was opposed by the petitioner, by bringing on record the material of actual movement of goods, payment of tax through the banking channel, as well as filing of return, which was reflected in GSTR-3B of both the petitioner and supplier, but no weightage was given while passing the order under section 74.
Briefly, the petitioner, engaged in trading & manufacturing of pharma products on a wholesale basis, purchased medicines from Unimax Pharma Chem, which was duly registered with the GST department as well as a Drug License Holder, at the time of supply. The entire payment for purchases was made through the banking channel, and the supplier also submitted their GSTR-1 and GSTR-3B on the GST Portal within the stipulated time, after paying the due tax on the turnover generated by the supplier.
Later, the Respondent/ Department issued SCN under Section 74 of the UPGST Act on the ground that the petitioner has claimed ITC through GSTR-3B for the tax period April 2021 on the purchase made from Unimax Pharma Chem, which has itself got its registration cancelled; as such, the petitioner has incorrectly claimed ITC. The petitioner was informed that the recipient purchaser can claim the ITC only when the supplier has deposited the collected tax with the department as per Section 16(2)(c) of the Act. The respondent therefore recorded a finding that the petitioner has not made actual purchases, and there was a difference in the bill reflected in GSTR-2A and the bill disclosed by the petitioner. Thus, there was an allegation of claiming a forged ITC.
Case Relied On:
Continental Foundation Joint Venture Holding, Nathpa, H.P. vs. Commissioner of Central Excise, Chandigarh-I [(2007) 10 SCC 337]
Appearances:
Senior Advocate R. R. Agarwal and Advocate Suyash Agarwal, for the Petitioner/ Taxpayer
Chief Standing Counsel, for the Respondent/ Revenue
