Tripura High Court
M/S Sahil Enterprises vs Union Of India And Others on 24 April, 2025
Page 1 of 10
HIGH COURT OF TRIPURA
_A_G_A_R_T_A_L_A_
WP(C) No.688 of 2022
M/S Sahil Enterprises
...... Petitioner(s)
VERSUS
Union of India and others
...... Respondent(s)
For Petitioner(s) : Mr. Naveen Bindal, Advocate,
Mr. Mukul Singla, Advocate,
Mr. Prabal Kumar Ghosh, Advocate.
For Respondent(s) : 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. Naveen Bindal, learned counsel assisted by Mr.
Mukul Singla, learned counsel and Mr. Prabal Kumar Ghosh, learned
counsels 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 17.05.2022 (Annexure-1) whereby the respondent No.3, the proper
officer, confirmed the demand of Rs.1,11,60,830/- 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 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 300A of the
Constitution of India and the provisions of the CGST Act, 2017. The
relevant part of the impugned order at paragraphs No.7.2 and 7.3 is extracted
hereunder as they reflect the findings of the adjudicating officer that the
noticee had failed to put up any cogent proof that the tax had been paid and
that the provisions of Section 16(2)(c) of the Act had been met since as per
Section 155 of the Act the burden of proof for eligibility of Input Tax Credit
lies on the noticee.
"7.2. I have noted the contentions of the Noticee. I also find that the Department had
intimated the Noticee that tax has not been paid by the Supplier. The Department did
not allege any fraud/misstatement/willful suppression on the part of the Noticee. I
find it fair and adherence to natural justice that the Noticee should either accept the
information supplied by the Department and act in accordance to the provisions of
the Act or contest the same by supplying any cogent proof/veritable evidence to
prove otherwise.
7.3. However, I find that the Noticee has failed to put up any cogent proof that the
tax has been paid and that the provisions of Section 16(2)(c) of the Act have been
met. 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 payments made by Supplier to the Government
Exchequer is violative of the provisions of Section 16(2) of CGST Act, 2017 and
thus ineligible for claiming ITC."
[3] The adjudicating officer, therefore, held that non-submission of
proof of payments by the supplier to the Government exchequer was
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 07.01.2021 concerning the tax period July, 2017 to January, 2019. By
an order dated 27.09.2022 passed in IA No.01 of 2022 preferred by the
petitioner, the operation of the demand cum show-cause notice dated
07.01.2021 had been stayed. It is pointed out by learned counsel for the
petitioner that by that time the adjudication order had already been passed on
17.05.2022. As such, the prayer was for stay of the adjudication order.
[4] Respondent No.4 was also impleaded during pendency of the
writ petition vide order dated 22.08.2022. By order dated 12.09.2022,
learned Assistant Solicitor General, Mr. Bidyut Majumder was also asked to
obtain information from the Jurisdictional Tax Officer as to whether any
proceeding has been initiated against the respondent No.4 for non-deposit of
tax collected by him or not. Respondent No.4 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 July, 2017 to January, 2019 has been duly
paid by him or not.
[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
paid against invoices raised by the selling dealer in course of business transaction.
Petitioner alleges that due to non-deposit of taxes by the selling dealer the availment
of ITC to the tune of Rs. 1,11,60,830/- for the period July, 2017 to January, 2019 has
been dis-allowed under Section 73 of the CGST Act by the Adjudicating Officer as
per the adjudication order dated 17.05.2022 (Annexure 11). He has sought quashing
of the adjudication order dated 17.05.2022 issued by respondent no.3 whereby
demand of Rs.1,11,60,830/- 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 no. 4 being the selling dealer.
Learned counsel for the respondent-CGST has drawn attention of this court to para
7.3 of the adjudication order which records that the noticee has failed to put up any
cogent proof that the tax has been paid and that the provisions of Section 16(2) of the
Act have been met. The burden of proof for eligibility for ITC lies on the notice
under Section 155 of the CGST Act. Non-submission of proof of payments made by
the supplier to the government exchequer is violative of Section 16(2)(c) of the
CGST Act, and thus, he is ineligible for claiming ITC.
Learned counsel for the petitioner has made averments to the effect that he has paid
the tax amount of Rs.1,11,60,830/- to its supplier, respondent no. 4. The petitioner's
case is that the Act does not provide mechanism for the petitioner to verify whether
taxes paid to the selling dealer has been duly deposited by him to the government
exchequer. He can at best verify filing of GSTR 3B return, but whether the taxes
have actually been paid or not cannot be verified.
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 of 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 July, 2017 to
January, 2019. According to the petitioner, Section 16(2)(c) of the Act does not
make a rational classification between a bonafide purchasing dealer and a guilty
person.
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 15th July, 2024 at 10.30
a.m. with all supporting documents which includes the invoices for the period raised
by the Respondent No.4, proof of payment of taxes in lieu thereof to the Respondent
No. 4, ledger, bank statement, cash receipts, 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 as are in the custody of the petitioner, in
support of proof of taxes paid to the selling dealer against the invoices raised by him
for the tax period from July, 2017 to January, 2019.
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 July, 2017 to January, 2019 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 by 09.08.2024.
The matter be listed on 14.08.2024."
[6] After carrying out the verification exercise, an affidavit was
filed by the respondents No.2 and 3 on 13.08.2024 enclosing the verification
report. The findings of the Assistant Commissioner i.e. the proper officer,
Tripura Division-I, CGST, Tripura at paragraph No.7 are usefully extracted
hereunder for better understanding.
"I have gone through the submissions made by the petitioner including Copy of all
tax invoices issued by M/s Sentu Dey, Ledger account certified by CA, Bank
statement certified by bank, Balance sheet & Profit & Loss certified by CA and CA
certificate dated 12.07.2024 very carefully.
7.1 The course of verification exercise conducted in presence of the authorized
representative of the petitioner carefully.
7.2 I find that the clarification is made by the petitioner as per the invoices, party
ledger of Shri Sentu Dey maintained by the petitioner for the period 1" July 2017 to
31 January. 2019, wherein both the purchases and the payments are mentioned and
as per the STATEMENT OF ACCOUNTS of UNION BANK OF INDIA, Branch-
Kaithal, Haryana of bank account of M/s Sahil Enterprises, customer ID-222851183,
Account no.-387701010271539 from 1" July 2017 to 31 January.
7.3 I find that, as per the STATEMENT OF ACCOUNTS of UNION BANK OF
INDIA, Branch- Kaithal, Haryana of M/s Sahil Enterprises, customer ID-222851183,
Account no.- 387701010271539 from 1" July 2017 to 31" January, 2019 it is evident
that M/s Sahil Enterprises has paid Rs. 23,64,08,992/- to M/s Sentu Dey during the
concerned period and as per invoices issued by M/s Sentu Dey to M/s Sahil
Enterprises, total gross Invoice value for the said period is Rs.23,43,77,501.4/-.
Thus, the petitioner had paid Rs.20,31,490.56/- in excess to the supplier in
comparison to the gross invoice value for the period.
7.4 A CA certificate is submitted by the authorized representative certifying that M/s
Sahil Enterprises having GST No.16BPFPPS9527H1ZF R/o C.S plot no. PB-841,
Khatian No.4971, P.S. Boghjungnagar, Moujakhayerpur, Agartala, West Tripura,
Tripura, 799001 has made all due payments to M/s Sentu Dey having GST
No.16AZIPD6343A2ZT during the financial years 2017-2018 and 2018-2019.
Therefore, based on joint verification of the record submitted to the department as
per direction of the Hon'ble High Court, Tripura, it appears that the invoices detailed
in serial no.1-236 of Table-1 on page no. 2 to page no.6 of the Order in Original No.
03/GST/TR-I/AGT/2022-23 dated 17.05.2022, is issued to the M/s Sahil Enterprises
by the supplier M/s Sentu Dey.
On verification of the payment particular, it is evident that the gross invoice amount
including tax has been paid to M/s Sentu dey by M/s Sahil Enterprises against the
invoices detailed in serial no.1-236 of Table-I on page no. 2 to page no.6 of the
Order in Original No. 03/GST/TR-1/AGT/2022-23 dated 17.05.2022 issued by the
Assistant Commissioner, Tripura-I Division, CGST.
However, on scrutiny of the GSTR-9 and GSTR-9C of M/s Sahil Enterprises for the
Period 2017-2018 and 2018-2019 it is noticed that the petitioner has taken more ITC
in GSTR3B than the ITC available in GSTR2A for Period 2017-2018 and 2018-2019
totaling to Rs.3076912.36.
However, it is pertinent to mention here that the Hon'ble Supreme Court's vide its
judgment against 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 has been conducted in presence of the Authorized representative, Mr.
Dipankar Saha S/o Dilip Saha, Aadhar No.: 4129 2859 6431, R/o Bishalgarh,
Tripura on behalf of M/s Sahil Enterprises but the Authorized representative is
directed not to sign the joint verification and submitted that they require more time
to submit reply against the excess ITC availed as per GSTR9 for the period 2017-
2018 and 2018-2019."
[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 on the basis of intelligent inputs of
passing irregular ITC 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.4 and along with the said letter one document of statement of
total demand and recovery status were also enclosed. Perusal of the said
status report indicated that the respondent No.4 was liable to pay
Rs.19,74,32,052.63/- on account of tax, cess, interest and 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.4 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.4 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.4. The affidavit also encloses
the summary of order contained in Form GST DRC-07 against the
respondent No.4 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.4 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.4 imposing
liability of tax, interest and penalty to the tune of Rs.2,98,77,656.63 has been
enclosed.
[9] The respondent No.4 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.4. 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 (See page 290, i.e. Statement of Total
Demand and Recovery Status). It therefore indicates that recovery to that
extent has been made from respondent No.4 before initiation of the demand
cum show-cause notice against the petitioner dated 07.01.2021.
[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.4 selling
dealer would not be justified since the proceedings for reversal of ineligible
ITC to the tune of Rs.1,11,60,830/- were initiated as per the show-cause
notice dated 07.01.2021 after recovery of Tax dues from the respondent
No.4 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.4 for the period July, 2017 to January, 2019 to the tune of
Rs.23,64,08,992/- inclusive of GST. It is apparent that the respondent No.4
is not a bona fide selling dealer. Proceedings under Section 74(1) of the
CGST Act against the respondent No.4 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.4 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. 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.
[11] Learned counsel for the petitioner further submits that though
the verification report in the 3rd last concluding paragraph makes a reference
that petitioner has taken more ITC in GSTR-3B than ITC available in GSTR
2A for the period July, 2017 to January, 2019 totaling Rs.30,76,912.36/- but
petitioner has not only been dealing with the respondent No.4, selling dealer
during the said tax period. The verification exercise is confined to the
transaction between the petitioner and the respondent No.4 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.30,76,912.36/-
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.
[12] Mr. Paramartha Datta, learned counsel for the CGST, is not in a
position to deny the aforesaid statements made in the additional affidavit
dated 12.08.2024, the findings of the proper officer, respondent No.3 dated
09.08.2024 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.4 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 19.06.2025.
(BISWAJIT PALIT) J (APARESH KUMAR SINGH) CJ
DIPESH DEB Date: 2025.04.29 18:01:55
