In a major ruling, the Himachal Pradesh High Court has dismissed the plea by the Himalaya Wellness Company challenging a 15 pages show cause notice (SCN) demanding inadmissible GST Input Tax Credit (ITC) worth Rs. 4.37 crores.
Himalaya Wellness Company, the petitioner/assessee, is a partnership firm that was established under the Indian Partnership Act, 1932, among other things. It supplies personal care products and pharmaceuticals, including medications, cosmetics and makeup, hair shampoo preparations, oral or dental hygiene preparations, and soap. In order to move products into and out of the State of Himachal Pradesh, the petitioner made an agreement with the products Transportation Agencies (GTA).
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According to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 03/2022-Central Tax (Rate) issued 13.07.2022, GTA services are subject to either forward charge or reverse charge taxes. As a result, the petitioner paid the GST and got the Input Tax Credit (ITC) for the GTA services. Following the Central Tax Department’s examination of the petitioner’s books of accounts, the petitioner received an audit inquiry notice highlighting a number of inconsistencies.
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In response to the inquiry notice, the petitioner submitted all necessary supporting documentation. The petitioner’s reply was deemed unacceptable by the Deputy Commissioner, Goods and Services Tax (Audit), Circle-Baddi, Central Revenue Building, Plot No. 19, Sector 17-C, Chandigarh-160018, who issued the Final Audit Report without taking the petitioner’s arguments into consideration.
In order to demand and recover the alleged inadmissible input tax credit (ITC), or Rs. 4,36,75,439; the alleged short paid GST, which amounts to Rs. 27,446; the interest on non-payment of GST, which amounts to Rs. 14,945; and interest and penalties under the CGST Act, the department issued a show-cause notice. Additionally, the show cause notice suggested allocating Rs. 6,85,440 in GST payments to the demand made in the notice.
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The government said in the reply that the writ petition is unmaintainable, especially in light of the show cause notice, which would be decided entirely in accordance with natural justice principles. The mere fact that the respondents issued the show cause notice does not imply that they did so with a preconceived notion.
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The division bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja has observed that merely because the petitioner has been served with the show cause notice would not mean that the same has been issued with the pre-conceived mind and in violation of natural justice.
The court was of viewe that the proceedings are still at the stage of show cause notice, which has been assailed in the instant case. Therefore, the petitioner cannot raise this claim, that too, at this stage.
The court observed that the department had issued the petitioner with a comprehensive 15-page show cause notice that included enough information about how it had reached its judgment to warrant the petitioner’s show cause notice. Therefore, addressing the merits of the show cause notice in order to consider the petition would be equivalent to destroying a stillborn action.
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