In a recent judgement, the Rajasthan High Court has ruled that claiming Input Tax Credit ( ITC ) on transactions with non-existent firms violates the principles of natural justice, leading to the dismissal of writ petition.
The petitioner in a writ petition to invoke the extraordinary jurisdiction of this Court, despite the availability of an alternative remedy. The petitioner argued that their reply has not been properly considered.
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Mr. Siddharth Bapna, representing the assessee contended that, in cases where the department seeks to reverse input tax credit due to the supplier’s failure to pay tax, the press release mandates that the Authorities should first attempt to recover from the supplier. It is only under exceptional circumstances, such as the supplier being untraceable, closure of the supplier’s business, or the supplier lacking adequate assets, that the buyer should be held accountable.
He submitted that this issue has already been raised before this Court in D.B. Civil Writ Petition No. 19636/2023, M/s Apar Fragrances vs Union of India where the writ petition on this issue has been entertained despite existence of an alternative remedy.
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Further, the counsel would further submit that this issue has also been dealt with by the Calcutta High Court and orders have been passed, which case has also been referred to by this Court in M/s Apar Fragrances versus Union of India (Supra) and petition has been entertained.
Per contra, Mr. Sandeep Taneja, representing the respondent, submitted that this case involves the reversal of input tax credit based on the factual premise that the transactions in question were conducted with a bogus or fake firm solely to claim input tax credit. Further directed the Court’s attention to both the impugned order and the report from the investigation wing.
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The bench observed that this case did not involve authorities operating on the assumption that input tax credit had been wrongly availed by the buyer or seller, despite the existence of a seller or supplier. Consequently, the authorities did not prioritize taking action against the supplier or seller before proceeding against the buyer.
Without addressing the sufficiency of the material on record concerning the alleged supplier firm being fake or non-existent, it is sufficient to state that this petition raises a factual dispute and does not involve any jurisdictional issue or violation of principles of natural justice. Therefore, this case is distinguishable from the cases cited to seek intelligence from this Court.
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Accordingly, the division bench of Justice Ashutosh Kumar and Justice Maninda Mohan Srivastava concluded that the petition was dismissed, granting the petitioner the liberty to avail alternative remedies. Considering the submission that the petition was filed before the expiry of the limitation period, it is directed that if the appeal is filed within three months from today, the Appellate Authority shall decide the appeal on its own merit without considering the question of limitation.
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