Tripura High Court
M/S Malaya Rub-Tech Industries vs Union Of India And Others on 24 April, 2025
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HIGH COURT OF TRIPURA
_A_G_A_R_T_A_L_A_
WP(C) No.849 of 2022
M/S Malaya Rub-Tech Industries
...... Petitioner(s)
VERSUS
Union of India and others
...... Respondent(s)
For Petitioner(s) : Mr. Somik Deb, Advocate,
Ms. Janhavi Mahana, Advocate,
Mr. Pannalal Debbarma, Advocate.
For Respondent(s) : Mr. Bidyut Majumder, Dy. S.G.I.,
Mr. B.N. Majumder, Sr. Advocate,
Mr. Paramartha Datta, Advocate,
Mr. Elembrok Debbarma, Advocate.
HON'BLE THE CHIEF JUSTICE MR. APARESH KUMAR SINGH
HON'BLE MR. JUSTICE BISWAJIT PALIT
=O=R=D=E=R=
24/04/2025
Heard Mr. Somik Deb, learned senior counsel assisted by Ms.
Janhavi Mahana, learned counsel and Mr. Pannalal Debbarma, learned
counsel appearing for the petitioner.
[2] The present writ petition was filed by the petitioner, a registered
person, under the CGST Act, 2017 for quashing of the adjudication order
dated 17.02.2022 (Annexure-3 supra) whereby the respondent No.6, the
proper officer, confirmed the demand of Rs.22,09,964/- along with interest
and penalty under Section 73 of the Central Goods & Services Tax Act,
2017 (the Act of 2017, for short), on account of non-deposit of tax by the
supplier i.e. the private respondent No.7 to the Government exchequer.
Petitioner also questioned the vires of Section 16(2)(c) of the Act of 2017 as
being un-constitutional and violative of Articles 14,19(1)(g) and 300-A of
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the Constitution of India and the provisions of the CGST Act, 2017. The
relevant part of the impugned order at paragraphs No.3.8.2 to 3.12 and the
operative part thereof is extracted hereunder as they reflect the findings of
the adjudicating officer that non-submission of proof of acquisition of items
supplied to the petitioner-purchasing dealer is violative of the provisions of
Section 16(2) of CGST Act, 2017 since as per Section 155 of the Act, the
burden of proof for eligibility of Input Tax Credit lies on the noticee.
"3.8.2. Since availment of ITC is subject to certain conditions as provided by the
Section 16(2) of the Statue of CGST Act, 2017, I hold that the contentions of the
Noticee as stated by them in their submissions are not tenable. The availment of ITC
which is allowed to the recipient of the goods and services was only on provisional
basis which would have attained finality only after supplier made payment of GST as
envisaged under section 16(2)(c) of the Act. The non-payment of tax by the Supplier
has not been challenged by the Noticee.
3.9. I also find from the records that the Noticee was intimated of the ascertained tax
as being payable under section 73(5) by Form GST DRC-01-A on 13.11.2020. But
the Noticee failed to reverse/pay the ascertained amount of tax.
3.10. Since as per Section 155 of the CGST Act, 2017, the Burden of Proof for
eligibility for Input Tax Credit lies on the Noticee, I am constrained to hold that the
non-submission of proof of acquisition of items supplied is violative of the
provisions of Section 16(2) of CGST Act, 2017 and thus ineligible for claiming ITC.
3.11. Therefore, on the basis of findings from the above discussion, I hold that the
Noticee has wrongfully availed Input Tax Credit of Rs.22,09,964/- (Rupees twenty
two lakh, nine thousand, nine hundred and sixty four only) and the same is liable to
be reversed and recovered in items of Section 73(1) of the Act along with interest
payable thereon under Section 50 of the Act.
3.12. Accordingly, as discussed and in view of legal provisions cited above, I hold
that the Demand-cum-Show Cause Npotice issued to the Noticee M/S Malaya Rub-
Tech industries, Room No.B, Plot No.24, TIDC Rubber Park, Bodhjungnagar, West
Tripura-799008 having GSTIN : 16AANFM5704E2ZC vide C No.
V(15)39/CGST/SCN/TR-1/2021 dated 14/01/2021 is sustainable and accordingly,
pass the following order.
ORDER
(a) I confirm the Demand-cum-Show Cause Notice issued to the Noticee vide C. No. V(15)39/CGST/SCN/TR-1/2021 dated 14/01/2021 for recovery of wrongfully availed ineligible ITC of Rs.11,04,982/- only under CGST Head & of Rs.11,04,982/- (Rs. eleven lakh four thousand nine hundred eighty two only) under SGST Head, totaling to Rs.22,09,964/- (Rupees twenty two lakh nine thousand nine hundred sixty four only) under Section 73(9) of the CGST Act, 2017 and the analogous State Goods & Services Tax 2017.
(b) I order the Noticee to pay interest at the applicable rate on the amount of confirmed demand of Rs.22,09,964/- calculated in terms of Section 50(3) of the CGST Act, 2017 & leviable under Section 73(9) of the CGST Act, 2017 and the analogous State Goods & Services Tax, 2017.
(c) I impose Penalty equivalent to 10% of the wrongfully claimed Input Tax Credit of Rs.22,09,964/- (Rupees twenty two lakh nine thousand nine hundred sixty four Page 3 of 11 only) in terms of Section 73(9) of the CGST Act, 2017 and the analogous State GST Act. "
[3] The adjudicating officer, therefore, held that non-submission of proof of acquisition of items supplied to the petitioner-purchasing dealer is violative of the provisions of Section 16(2) of the CGST Act, 2017 and thus the noticee was ineligible to claim ITC as detailed in the show-cause notice dated 14.01.2021 concerning the tax period August, 2017 to July, 2019. By an order dated 27.09.2022, an interim protection was given to the petitioner not to take any coercive steps against him till the next date. It is pointed out by learned counsel for the petitioner that by that time the adjudication order had already been passed on 17.02.2022. As such, the prayer was for stay of the adjudication order.
[4] By order dated 16.05.2023, learned counsel for the CGST and SGST authorities were also asked to file an affidavit indicating as to whether any proceedings have been initiated against the respondent No.7 for recovery of the tax dues and whether any criminal proceedings have been initiated for any offences made out under the GST Act. Respondent No.7 has entered appearance and also filed a counter affidavit. During midst of the proceedings, by order dated 03.07.2024, the adjudicating officer was asked to undertake a verification exercise in the presence of the authorized representative of the petitioner to arrive at a finding as to whether the petitioner has submitted proof to the effect that the entire taxes raised against the invoices by its selling dealer for the tax period 08.03.2018 to 30.11.2018 has been duly paid by him or not.Page 4 of 11
[5] The order dated 03.07.2024 is extracted hereunder for easy reference.
"Petitioner claims to be a bonafide purchaser who has availed ITC in lieu of taxes raised against invoices raised by the selling dealer in course of business with them. Petitioner alleges that due to non-deposit of taxes by the selling dealer the availment of ITC to the tune of Rs. 22,09,964/- for the period from 08.03.2018 to 30.11.2018 has been dis-allowed in a proceeding under Section 73 of the CGST Act by the Adjudicating Officer as per the adjudication order dated 17.02.2022 (Annexure 3). The petitioner has sought quashing of the adjudication order dated 17.02.2022 issued by respondent no. 6 whereby demand of Rs.22,09,964/- has been confirmed alongwith interest and penalty under Section 73 of the CGST Act purportedly on account of non-payment of GST by the supplier of the petitioner to the government exchequer.
Counter affidavit has been filed by the respondent-CGST as well as the private respondents being the selling dealer-respondent no. 7 Learned counsel for the respondent-CGST has referred to the statements made at para 3.10 of the adjudication order wherein it has been recorded that non-submission of proof of acquisition of items supplied to the petitioner purchasing dealer is violative of the provisions of Section 16(2) of the CGST Act, 2017 and thus he is ineligible for claiming ITC. As per Section 155 of the CGST Act, 2017, the burden of proof for eligibility for ITC lies on the noticee.
Learned counsel for the petitioner has made statements in the writ petition to the effect that he has paid all taxes against the invoices generated by selling dealer- respondent no. 7 for the tax period in question.
It appears that during course of adjudication proceeding, the petitioner has not evidenced the documents, such as, the invoices raised by selling dealer for the tax period and proof of payment including tax against those invoices to the selling dealer. As such, a question of fact remains to be verified as to whether the petitioner has dutifully and bonafide paid taxes raised against the invoices by the selling dealer in respect of the transactions entered between them for the period from 08.03.2018 to 30.11.2018.
Having regards to the aforesaid circumstances, we are of the view that the petitioner should appear before the Adjudicating Officer i.e. Assistant Commissioner, CGST, Tripura Division-1, Agartala within 2 weeks preferably on 12th July, 2024 at 10.30 a.m. with all supporting documents which includes the invoices for the period raised by the Respondent No.7, proof of payment of taxes in lieu thereof to the Respondent No. 7, ledger, bank statement, cash receipt, statement of profit and loss account as certified by the Charter Accountant and any other document as may be considered necessary by the Adjudicating Officer in order to satisfy himself as are in the custody of the petitioner, in proof of taxes paid to the selling dealer against the invoices raised by him for the tax period from 08.03.2018 to 30.11.2018.
The Adjudicating Officer would undertake the verification exercise within a period of 2 weeks thereafter in presence of the authorized representative of the petitioner. The Adjudicating Officer would arrive at a finding as to whether the petitioner has submitted proof to the effect that the entire taxes raised against the invoices by its selling dealer for the tax period from 08.03.2018 to 30.11.2018 has been duly paid by him or not. The report of the Adjudicating Officer be placed on record by way of an affidavit before the next date.
Learned counsel for the CGST would also seek instruction as to whether any steps for recovery of the taxes against the private respondent has been initiated and the outcome thereof.
Let such report be submitted latest by 07.08.2024.
The matter be listed on 14.08.2024.Page 5 of 11
[6] After carrying out the verification exercise, an additional affidavit was filed by the respondent No.6 on 09.08.2024 enclosing the verification report. The findings of the Assistant Commissioner i.e. the proper officer, Tripura Division-I, CGST, Tripura at paragraph No.5 thereof are usefully extracted hereunder for better understanding.
"5. FINDINGS I have gone through the submissions made by the petitioner including Copy of all tax invoices issued to M/s Malaya Rub-Tech Industries, Ledger account, Bank statement and Power of Attorney carefully.
5.1. The course of verification exercise conducted in presence of the authorized representative of the petitioner carefully.
5.2. I find that the clarification made by the petitioner as per the original invoices, party ledger of Shri Sentu Dey maintained by the petitioner for the period 1st April 2017 to 31st March, 2019 wherein both the purchases and the payments are mentioned and as per the STATEMENT OF ACCOUNTS of SOUTH INDIAN BANK LTD, Kottayam Branch of bank account of M/s Malaya Rub-Tech Industries with Bank account No.0037083000002642 from 1st March, 2018 to 30th November, 2018 and from 1st December, 2018 to 5th December, 2018 and as per STATEMENT OF ACCOUNTS of SOUTH INDIAN BANK LTD, Kottayam Branch of the bank account of M/S Malaya Rub-Tech Industries with Bank Account No.0037073000003005 from 01.10.2018 to 30.11.2018.
5.3. I find that, as per STATEMENT OF ACCOUNTS the Petitioner, M/S Malaya Rub-Tech Industries has paid Rs.4,01,93,761/- to M/S Sentu Dey from 01.03.2018 to 30.11.2018 and 01.12.2018 to 05.12.2018 but as per invoices issued by M/S Sentu Dey to M/S Malaya Rub-Tech Industries from 01.03.2018 to 30.11.2018, the total amount to be paid is Rs.4,64,09,243.07/-.
5.4. The difference of Rs.62,15,482.07/- which has not been paid by the petitioner to the supplier, M/S Sentu Dey, is further clarified by the petitioner as this discrepancy arises from the bills of Malaya Trade Impex (MTI) Tripura being incorrectly filed by Sentu Dey in Malaya Rub-Tech Industries (MRI) Tripura GSTIN, amounting to a total GST of Rs.3,17,108/-. The amount as per invoice No.536, 500, 497 and 507, dated 28.12.2018, 11.12.2018, 14.12.2018 and 16.12.2018 respectively is Rs.66,59,263.8/-.
5.5. A CA certificate is submitted by the authorized representative certifying that the ITC against the Invoices with invoice No.536, 500, 497 and 507, dated 28.12.2018, 11.12.2018, 14.12.2018 and 16.12.2018 respectively with invoice value of Rs.66,59,263.8/- amounting to a total GST of Rs.3,17,108/- has not been availed by them.
Therefore, based on joint verification of the record submitted to the department as per direction of the Hon'ble High Court, Tripura, it is confirmed that the invoices detailed in serial no.1-116 of Table-1 on page no. 2 to page no.5 of the Order in Original No. 08/GST/TR-1/AGT/2021-22 dated 17.02.2022, is issued to the M/s M/S Malaya Rub-Tech Industries by the supplier M/s Sentu Dey and the invoices detailed in serial No.117-120 of Table-1 on page no.2 to page no.5 of the Order in Original No.08/GST/TR-1/AGT/2021-22 dated 17.02.2022, with invoice No.536, 500, 497 and 507, dated 28.12.2018, 11.12.2018, 14.12.2018 and 16.12.2018 respectively with invoice value of Rs.66,59,263.8/- amounting to a total GST of Page 6 of 11 Rs.3,17,108/- are not issued to M/s Malaya Rub-Tech Industries by M/s Sentu Dey but uploaded against GSTR2A of M/s Malaya Rub-Tech Industries, duly certified by the concerned Authorized representative, Sri Dinen Majumder, Chartered Accountant.
On verification of the payment particular, it is confirmed that the gross invoice amount including tax is being paid to M/s Sentu dey by M/s Malaya Rub-Tech Industries against the invoices detailed in serial no.1-116 of Table-I on page no. 2 to page no.5 of the Order in Original No. 08/GST/TR-I/AGT/2021-22 dated 17.02.2022 issued by the Assistant Commissioner, Tripura-I Division, CGST.
However, on scrutiny of the GSTR-9 and GSTR-9C of M/s Malaya Rub-Tech Industries for the Period 2018-2019 it has been found that the petitioner has taken more ITC in GSTR3B than the ITC available in GSTR2A which is contradictory to the claim made by the petitioner for not availing the ITC against the invoices detailed in serial no.117-120 of Table-1 on page no.2 to page no.5 of the Order in Original No.08/GST/TR-I/AGT/2021-22 dated 17.02.2022, with invoice No.536, 500, 497 and 507, dated 28.12.2018, 11.12.2018, 14.12.2018 and 16.12.2018 respectively with invoice value of Rs.66,59,263.8/- amounting to a total GST of Rs.3,17,108/-.
However, it is pertinent to mention here that the Hon'ble Supreme Court's judgment vide SLP(C) No.027827-027828/2023, dated 14.12.2023 upheld the order passed by the Hon'ble Calcutta High Court vide MAT 1218 of 2023 dated August 02, 2023, in the case of M/s. Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax, held that if the recovery is not possible from the Supplier then the recovery may be initiated from the recipient.
Verification is conducted in presence of the Authorized representative, Shri Dinen Majumder, Chartered Accountant on behalf of M/S Malaya Rub-Tech Industries."
[7] It is also relevant to refer to the statement made at paragraph No.4 of the said affidavit where it has been stated that show-cause notice was issued against the private respondent No.7 on the basis of intelligent inputs of passing irregular ITC by M/s Sentu Dey, a taxpayer with Tripura State Goods and Services Tax jurisdiction. It refers to the letter dated 17.07.2020 received from Deputy Commissioner of State Tax authority where it is mentioned that they have taken up the matter and accordingly an order was issued by the Superintendent of State Tax, Bishalgarh Charge for the period July, 2017 to September, 2019. A show-cause notice was issued against M/S Sentu Dey, respondent No.7 and along with the said letter one document of statement of total demand and recovery status was also enclosed. Perusal of the said status report indicated that the respondent No.7 was liable to pay Rs.19,74,32,052.63/- on account of tax, cess, interest and Page 7 of 11 penalty under the provisions of SGST & CGST Act, 2017. A total amount of Rs.53,93,605/- each under CGST and SGST were recovered for the period August, 2017 to February, 2018 and Rs.4,86,901/- towards CGST and Rs.5,86,126/- towards SGST in total were recovered for the period April, 2018 to August, 2018. The said recovery was done till 6th July, 2020. Further, it is stated that CGST department did not initiate a separate enforcement action against the respondent No.7 to avoid duplication of efforts as the said respondent is a taxpayer registered with Tripura State Goods and Services Tax jurisdiction. Letters dated 06.02.2020 to the Commissioner of TSGST and 16.07.2020 from Deputy Commissioner of State Tax are annexed as Annexure-R-2 and Annexure-R-3 respectively. [8] The affidavit also encloses a rectification of order in Form GST DRC-08 against the respondent No.7 concerning the tax period August, 2017 to February, 2018 initiated under Section 74 of the Act whereby the liability of tax, interest and penalty to the tune of Rs.2,04,56,673.54/- has been imposed. A summary of order contained in Form GST DRC-07 dated 26.11.2018 for the tax period April, 2018 to August, 2018 passed against the respondent No.4 under Section 74 of the Act imposing liability of tax, interest and penalty totaling Rs.1,54,96,323.54/- is also enclosed to this affidavit. Another summary of order contained in Form GST DRC-07 dated 11.09.2019 concerning tax period September, 2018 to March, 2019 for suppression of turnover in a proceeding under Section 74 of the Act has been annexed imposing liability of tax, interest and penalty to the tune of Rs.7,29,88,721.66/- against the respondent No.7. The affidavit also encloses the summary of order contained in Form GST DRC-07 against the Page 8 of 11 respondent No.7 for the tax period April, 2019 to June, 2019 on account of suppression of turnover in a proceeding under Section 74 of the Act imposing liability of tax, interest and penalty to the tune of Rs.3,48,76,637/-. A summary of order for the tax period July, 2019 in Form GST DRC-07 against the same respondent No.7 imposing liability of tax, interest and penalty to the tune of Rs.1,91,54,479.64/- is enclosed. Another summary of order for the tax period August, 2019 to September, 2019 contained in Form GST DRC-07 dated 11.03.2020 against the respondent No.7 imposing liability of tax, interest and penalty to the tune of Rs.2,98,77,656.63 has been enclosed.
[9] The respondent No.7 has not made any specific statement as to whether these adjudication orders have been challenged in an appeal before the Appellate Authority under Section 107(1) of the Act of 2017. If that be so, the demand has become final by now against the respondent No.7. The total demand arising out of these adjudication orders amounts to Rs.19,74,32,052.63/-. In the foregoing part of this order, reference has been made to paragraph 4 of the same counter affidavit of the respondent CGST from which it can be gathered that a total amount of Rs.1,18,60,237/- has been recovered till 06.07.2020. It therefore indicates that recovery to that extent has been made from respondent No.7 before initiation of the demand cum show-cause notice against the petitioner dated 14.01.2021. [10] In this background, learned counsel for the petitioner pleads that the rigours of Section 73(1) for alleged availment of ineligible ITC against the petitioner for non-deposit of tax by the respondent No.7 selling Page 9 of 11 dealer would not be justified since the proceedings for reversal of ineligible ITC to the tune of Rs.22,09,964/- were initiated as per the show-cause notice dated 14.01.2021 after recovery of Tax dues from the respondent No.7 to the tune of Rs.1,18,60,237/-. Therefore, the allegation of non-compliance of the statutory prescription under Section 16(2)(c) of the Act was not justified. The verification report undisputedly affirms that petitioner has made payment of tax in lieu of total amount of invoices raised by the respondent No.7 for the period 2018 to 2019 to the tune of Rs.66,59,263.8/- amounting to a total GST of Rs.3,17,108/-.
[11] It is apparent that the respondent No.7 is not a bona fide selling dealer. Proceedings under Section 74(1) of the CGST Act against the respondent No.7 for realization of tax along with interest and penalty have attained finality imposing a total liability of Rs.19,74,32,052.63/-. The factum of recovery of amount of Rs.1,18,60,237/- against the respondent No.7 by 06.07.2020 has been brought to the notice only by way of the additional affidavit filed by the CGST pursuant to the order dated 03.07.2024. (See page 139 i.e. Statement of Total Demand and Recovery Status). If that be so, the whole exercise of imposing tax liability along with interest and penalty upon the petitioner for availment of ineligible ITC could be without any basis. He is dealing with other selling dealers whose tax may not have been deposited within time though he has rightfully availed the ITC. It is submitted that since the accounts of private respondent No.7 have been attached and recovery of remaining tax dues is still underway, petitioner should not have been proceeded under Section 73(1) for availing Page 10 of 11 ineligible ITC and saddled with not only demand of tax but penalty and interest.
[12] Mr. Somik Deb, learned senior counsel for the petitioner further submits that though the verification report in the 2nd last concluding paragraph makes a reference that petitioner has taken more ITC in GSTR-3B than ITC available in GSTR 2A for the period 2018-2019 totaling Rs.3,17,108/- but petitioner has not only been dealing with the respondent No.7, selling dealer during the said tax period. The verification exercise is confined to the transaction between the petitioner and the respondent No.7 only. Taxes paid in lieu of invoices raised by any other selling dealer though not deposited by that selling dealer could not be reflected in the verification report. Petitioner is ready to face questions for availment of that amount of Rs.3,17,108/- during the said tax period but not in the instant proceedings. It is, therefore, submitted that the imposition of tax along with interest under Section 50(3) of the Act of 2017 and penalty under Section 73(9) could not be proper in the eye of law. Learned counsel for the petitioner, therefore, submits that the impugned adjudication order deserves to be quashed. If petitioner is entitled to get substantial relief on the merits of the challenge to the adjudication order on the above and other ancillary legal grounds, the necessity of deciding the vires of Section 16(2)(c) of the Act of 2017 may not arise.
[13] Mr. Paramartha Datta, learned counsel for the CGST, is not in a position to deny the aforesaid statements made in the additional affidavit dated 09.08.2024, the findings of the proper officer, respondent No.6 dated Page 11 of 11 06.08.2024 in the verification report and the recovery of the CGST and SGST amount to the tune of Rs.1,18,60,237/- from the respondent No.7 till 06.07.2020. However, he submits that once the adjudication order has been passed, he will have to seek instructions whether taking into account all these attending facts, the adjudicating officer can revise or rectify the order, in accordance with law. He prays for and is allowed 4(four) weeks time to obtain instruction on this specific issue.
As prayed for, matter be listed on 19th June, 2025.
(BISWAJIT PALIT) J (APARESH KUMAR SINGH) CJ
Digitally signed by
DIPESH DEB DIPESH DEB
Date: 2025.04.30
18:39:31 +05'30'