Patna HC quashes proceedings initiated u/s 73 of Bihar GST Act, 2017 (“BGST Act”) in respect of recovery of ineligible credit transitioned but not utilized, rejects Revenue’s plea that act of reflection on the electronic credit ledger is a confirmation of a wrong availment, liable for proceeding.
Facts:
M/s. Commercial Steel Engineering Corporation (“the Petitioner or assessee”) has sought to grant of transitional credit or adjustment of an excess of input tax credit (“ITC”) against future liabilities for an amount which is lying with the department in terms of order of assessment for the financial year 2007-08 and 2011-12. The assessment orders attained finality because it has not been appealed against
Further, according to the assessee, due to an inadvertent mistake of the Accountant, ITC was not reflected in the returns filed for the subsequent years and it is only in 2017 that the mistake of unadjusted ITC for the period 2007- 08 and 2011-12 was detected. Refund application for the financial year 2007-08 has been rejected on grounds that it was time barred.
Issue involved:
Whether the credit reflected in the electronic credit ledger of the assessee amounts to either availment or utilization of the credit?
Petitioner’s Contention:
The assessee filed an application in terms of Section 140 of BGST Act to take credit of the surplus VAT and Entry Tax and to carry forward the same in his electronic ledger in form TRAN-1 for the financial year 2007-08 and 2011-12.
Revenue raised a demand on tax liability on which transitional credit was claimed and imposed interest at the rate of 18% for availment of such credit and penalty equivalent to 10% of tax quantified.
Further, mere reflection of the transitional credit on the application filed by the petitioner under Section 140 of BGST Act, would not amount to either availing or utilizing the credit nor would be sufficient to invite a proceeding under Section 73 of BGST Act until such time that the Revenue by reference to records are able to demonstrate that the said credit was either availed of or utilized by the assessee.
Held:
The Hon’ble Patna HC vide Civil Writ Jurisdiction Case No. 2125 of 2019 held that :
- The assessee has regularly deposited his taxes which were found payable and there is nothing on record that this credit was ever availed of by the assessee to meet any tax liability for any particular period and which was recoverable under the proceedings so initiated.
- Section 73 of BGST Act enabled proceedings for determination of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilized for reasons other than fraud or willful misstatement or suppression of fact, where such default is committed by reason of fraud or willful misstatement or suppression of fact, a similar procedure inviting such action is provided u/s 74 of BGST Act.
- The HC found that it would be stretching the term ‘availment’ beyond prudence to treat the mere reflection of the transitional credit in the electronic credit ledger as an act of availment, for drawing a proceeding under Section 73(1) of the BGST Act.
- The legislative intent reflected from a purposeful reading of the provisions underlying Section 140 alongside the provisions of Section 73 and Rules 117 and 121 is that even a wrongly reflected transitional credit in an electronic ledger on its own is not sufficient to draw penal proceedings until the same or any portion thereof, is put to use so as to become recoverable.
Therefore, the Hon’ble HC allows the Petitioner writ while stating that the order passed by Revenue in purported exercise of power vested in him under Section 73 of BGST Act is held per se illegal and an abuse of the statutory jurisdiction and is accordingly quashed and set aside.
Citation: [TS-553-HC-2019(PAT)-NT]