The Madras High Court, in its judgment, set aside the Goods and Service Tax (GST) order denying Input Tax Credit (ITC) by invoking section 17(5) of the GST Act, 2017, without indicating reason.
Sri Dhanalakshmi Steels,the petitioner, challenged the impugned order dated 27.08.2024 whereby the petitioner’s claim of Input Tax Credit was sought to be disallowed on the premise that it is ineligible by invoking Section 17(5) of the GST Act.
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It is submitted by the counsel for the petitioner that the impugned notice while proposing to invoke Section 17(5) of the GST Act had only stated that the Input Tax Credit shall not be available in respect of the list of commodities and services mentioned and does not set out the reasons nor the clauses under Section 17(5) which gets attracted and results in denial of the petitioner’s claim of Input Tax Credit.
It was submitted by the counsel for the petitioner that in response to the notice, they had stated that they are only engaged in the trading of goods which are purchased and there is no further process at their end. Further no part of the inputs on which credit was claimed was being utilised by the petitioner for personal consumption or for construction of own building.
The counsel for the petitioner would also submitted that they were ready and willing to produce the tax invoices of Inward supply of taxable goods for the relevant period whenever it is convenient for the respondent. Thereafter the respondent without indicating the clause under Section 17(5) which stood attracted resulting in denial of petitioner’s claim to Input Tax Credit had fixed the personal hearing on 09.08.2024. However, the impugned order was passed confirming the proposal on the premise that the petitioner had not produced the tax invoices nor availed the opportunity of personal hearing.
The counsel for the petitioner submitted that unless and until they have been informed of the Clause under which the Input Tax Credit was sought to be denied, any opportunity of personal hearing would be an empty formality as they would not be in a position to put forth their case. It was submitted that it is fundamental that the assessee or the person against whom an adverse order is sought to be passed must be made aware of the case that he ought to meet.
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The counsel for the respondent submitted that the petitioner had not furnished the taxable invoices and that lead to the impugned order being passed confirming the proposal. However to a pointed question as to whether the respondent authority had indicated to the petitioner as to the Clause under Section 17(5) which stood attracted, the counsel for the respondent would submit that it appears it was not done.
A single bench of Justice Mohammed Shaffiq set aside the order allowed the respondent authority to issue a notice indicating the Clause under Section 17(5) of the act which gets attracted to enable the petitioner to respond and thereafter proceed in accordance with law after affording the petitioner a reasonable opportunity of hearing.
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