A Single Bench of Madras High Court has remanded the Input Tax Credit (ITC) Claim of Assessee owing to cash crunch that led the assessee to file GSTR-3B and GSTR-2 belatedly and in offline modes, while the same was rejected for belated filing.
The petitioner is doing business related to Petroleum Gases and other Gaseous Hydrocarbons in Urangampatty and registered with the respondent department in GSTIN.33BAGPA0449A1ZM and was promptly filing monthly returns. Based on the scrutiny and verification of GSTR-3B returns filed in the financial year 2017-2018 and 2018-2019, the 2nd respondent issued notice dated 27.04.2022 and directed the petitioner to show cause why there was a belated claim of Input Tax Credit (ITC) and also directed to remit back the same as wrong claim of ITC and proposed to reverse the same.
Further it is alleged that the petitioner had claimed on the purchase of Petroleum product. The petitioner submitted that due to financial crisis the petitioner had submitted GSTR-3B physically and the same was already explained to the respondents in person through his Accountant and hence the allegation by the respondents that the said claim is false and cannot be accepted.
The contention of the petitioner is that he had also explained the fact that the claim of ITC is described under Rule 60 of the TNGST Rules and the Form prescribed is Form GSTR-2, but the same was not notified. Moreover, the filing of GSTR-3B is to avail the input tax credit and not for claiming the same. So the reversal of input tax for belated claim as per Section 16(4) of TNGST Act is not applicable, since the filing of GSTR3B is not meant for claim of input tax credit.
The further contention of the petitioner is that the sales made to the petitioner and the tax collected from the petitioner were duly reported by other end suppliers through their respective GSTR-1 and the petitioner could not claim the same since Form GSTR-2 is not notified.
The bench noted that the petitioner has accounted for the purchases and credited the tax payment made through tax invoice, claimed ITC in the books of accounts and availed the same through GSTR-3B filed physically holding that, the allegation of belated claim of ITC itself is false and misleading.
The 2nd respondent, The Deputy State Tax Officer-1 had filed a counter affidavit in both the writ petitions stating that the writ petitions are not maintainable since the petitioner has an alternative remedy to prefer an appeal before the jurisdictional Appellate Deputy Commissioner (GST Appeals). Prima facie the revision of assessment was made out based on the scrutiny of GSTR-3B returns and hence notices in Form- GST-DRC-01A (Rule 142(i)) were issued to explain the issue with the documentary evidences why there was a belated claim of ITC.
It was added that the statute is very clear that the burden of proof is lying with the taxable person and he has to prove that there is no evasion of tax.
It was further submitted that, “The taxable person is mandated to file monthly returns only electronically and not by manually. Since the petitioner had not filed any objections and had not attended the personal hearing, the respondents left with no other option than to confirm the proposal already made in the notice. Accordingly, the order, dated 16.08.2022, was passed.” Therefore, the 2nd respondent prayed to dismiss the writ petitions.
The Bench heard Raja Karthikeyan, Counsel appearing for the petitioner in both the writ petitions and A.K.Manikkam, Special Government Pleader appearing for the respondents in both the writ petitions and perused the records.
It was observed that, “the respondents without giving any opportunity to file the returns by notifying the Form GSTR-2, cannot expect the taxable person to file returns. In fact, the petitioner has no intension to violate the provisions of the Act.”
“In order to show his bonafide, he has filed physically. Moreover, all tax liability is paid and there is no loss to the department. Moreover, the petitioner has also claimed financial crisis. Even though the financial crisis cannot be a ground for not filing the returns in time, not notifying of Form GSTR-2 is clearly a ground to consider the petitioner’s claim of belated returns”, the bench further noted.
It was further noted, with the relevant issue in mind, that, “The next contention of the petitioner is that the ITC can be claimed through GSTR-3B, but GSTN has not permitted to file GSTR-3B in online if the dealers had not paid taxes on the outward supply / sales. In other words, if the dealer is not enabled to pay output tax, he is not permitted to file GSTR-3B return in online and it is indirectly obstructing the dealer to claim ITC.”
Further, In the present case the petitioner was unable to pay output taxes and so the GSTN not
permitted to file GSTR-3B in the departmental web portal it is constructed that the petitioner had not filed GSTR-3B online, that resulted the dealer unable to claim his ITC in that particular year in which he paid taxes in his purchases
The most important observations being, “Hence if the GSTN provided option for filing GSTN without payment of tax or incomplete GSTR-3B, the dealer would be eligible for claiming of input tax credit. The same was not provided in GSTN network hence, the dealers are restricted to claim ITC on the ground of non-filing of GSTR-3B within prescribed time. if the option of filing incomplete filing of GSTR-3B are provided in the GSTN network the dealers would avail the claim and determine self-assessed ITC in online. The petitioner had expressed real practical difficulty. The GST Council may be the appropriate authority but the respondents ought to take steps to rectify the same. Until then the respondents ought to allow the dealers to file returns manually”, the bench allowed the appeal in favour of the assessee.
The Single Bench of Justice S Srimathy thus held that, “impugned orders are quashed. The respondents shall permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply / sales without paying taxes. Further the respondents are directed accept the belated returns and if the returns are otherwise in order and accordance to law, the claim of ITC may be allowed. Hence, the matter is remitted back to the authorities for reconsideration.”
The Madras High Court’s observation regarding the hindrance created by the absence of an option to file incomplete GSTR-3B online highlights the need for improvements in the GSTN infrastructure. The suggestion that the GST Council should address these practical difficulties and consider allowing manual filing until online options are optimized adds a policy dimension to the judgment.
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