Taxpayer Should Be Granted Opportunity Before AO To Produce Documents To Support His Claim Of Input Tax Credit: Kerala HC

While setting aside an order that disallowed an input tax credit of Rs. 4,84,448/- to a registered dealer under the provisions of the Central Goods and Services Tax Act (CGST Act), the Kerala High Court noted that the petitioner faced significant challenges during the initial period of the GST regime, and there was merit in the petitioner's submission that he had difficulty understanding the provisions of the GST Act.

A Single Judge Bench of Justice Dinesh Kumar Singh observed that “The Counsel for the petitioner submits that the supplier-dealers have paid the tax for which the petitioner had claimed input tax credit, and the petitioner has all the evidence to support his claim. The petitioner should be granted one opportunity before the Assessing Authority to produce all the documents to support his claim regarding his claim for the input tax credit to the extent of Rs.5,87,752/-”.

Advocate K. N. Sreekumaran appeared for the Petitioner, whereas Advocate Reshmita Ramachandran appeared for the Respondent.

As per the brief facts of the case, discrepancies were noticed in the monthly return filed by the petitioner, which were communicated to the petitioner through a notice. The petitioner did not file a reply or remit the tax and interest by the due date. An intimation was sent to the petitioner, determining the tax ascertained and payable under Section 73(5) of the Act, along with defects found in the return of the scrutiny. The petitioner was directed to pay the said amount of tax and interest by a specified date, failing which a show cause notice would be issued under Section 73(1). The petitioner had the opportunity to file objections to the intimation but did not do so. Subsequently, a notice under Section 73(1) of the Act along with DRC 01 was issued to the petitioner. However, the petitioner did not provide any documentary proof to support his claim and did not produce the required documents. As a result, the input tax credit claim of the petitioner was disallowed. The Assessing Authority imposed interest, along with a penalty, each under the CGST and SGST. The total tax, interest, and penalty assessed amounted to Rs. 4,84,448.

After considering the submission, the Bench noted that the period involved was 2017-18 when the GST regime was rolled out, and acknowledged that the petitioner might have faced enormous difficulty in understanding the provisions of the GST Act.

Finding that the tax had been paid to the Government, the Bench noted that the Government was not at a loss for which the petitioner's claim for input tax claim had been disallowed.

Thus, the High Court set aside the order to the extent of disallowing the input tax credit of Rs.4,84,448/- and directed the petitioner to appear before the State Tax Officer, with all the relevant documents in his possession to support his claim for the input tax credit. The High Court also directed that the State Tax Officer would, after examining the documents and hearing the petitioner, pass fresh orders in accordance with the law.

Cause Title: Anaz Abdul Rahiman Kutty and Ors v. State Tax Officer and Ors. [Neutral Citation: 2023: KER: 58854]

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