Calcutta High Court Stays Order For Reversal Of Input Tax Credit From Buyer For Reason That Seller Had Closed Its Business
The Calcutta High Court stayed the order confirming the demand of the Deputy Commissioner of Tax against a buyer for availing Input Tax Credit on the ground that the seller had closed business for the respective financial year.
The Court was hearing a Writ Petition challenging the order passed under Section 73(9) of the West Bengal/Central Goods and Services Tax Act, 2017 where the respondent Deputy Commissioner of State Tax raised a demand against the petitioner for availing Input Tax Credit (ITC) in violation of Section 16(2)(a) of the Act, on the grounds that the company with whom the petitioner had an agreement, had closed its business for the financial year 2018-19.
The bench of Justice Raja Basu Chowdhury observed, “Further considering the prima facie case made out by the petitioners there shall be a stay of the demand raised by the proper officer as is reflected in the order dated 30th March 2024, subject to the petitioners’ depositing 10% of the disputed tax amount with the GST authorities.”
Advocate Ankit Kanodia appeared for the Appellant and Advocate Anirban Ray appeared for the Respondent.
Relying on a press release dated May 4, 2018, issued by the Ministry of Finance, it is submitted that there should be no automatic reversal of input tax credit from the buyer due to non-payment of tax by the seller. It was further submitted that the cases where the seller defaults on tax payment, recovery should be pursued from the seller. However, the reversal of credit from the buyer remains an option for revenue authorities in exceptional situations, such as when the seller is missing, has closed their business, or lacks adequate assets.
It was further submitted that the mode and manner of recovery from the petitioner is contrary to the law laid down by the Division Bench of the Calcutta High Court in the case of Suncraft Energy Private Limited & Anr. v. Assistant Commissioner, State Tax, Ballygunge Charge & Ors.(2023)
Accordingly, the Court said that the Writ Petition should be heard and stayed the demand of the Officer.
The Court listed the matter for further hearing.
Cause Title: M/s. Asian Hotels (East) Ltd. & Anr. v. The Deputy Commissioner of State Tax & Ors.
Appearance:
Appellant: Adv. Ankit Kanodia, Adv. Megha Agarwal and Adv. Piyush Khaitan
Respondent: Adv. Anirban Ray, Adv. Md. T. M. Siddiqui, Adv. Tanoy Chakraborty, Adv. Saptak Sanyal and Adv. Debraj Sahu