Authorities Asked To Re-Evaluate GST Input Tax Claim: High Court

The petitioner approached the High Court of Himachal Pradesh to challenge the constitutional validity of Section 16(2)(c) of the CGST Act and the Himachal Pradesh GST Act, 2017, while also seeking to quash summary show cause notices and detailed notices dated August 17, 2021, that raised demands for tax, interest, and penalties.

This legal action followed a procedural history where the petitioner received summons and intimations on August 9, 2021, to which they responded with a detailed reply and supporting documentation to establish their entitlement to Input Tax Credit (ITC). However, the petitioner alleged that the authorities issued the impugned notices prematurely and without considering the submissions and evidence previously provided.

Issues in the case

1. Whether the petitioner is entitled to the benefit of Input Tax Credit (ITC) based on the genuineness of the transactions?

2. Whether the transactions were supported by valid documents and made before or after the cancellation of the supplier’s registration?

3. Whether the competent authority should be directed to consider the petitioner‘s objections and documents afresh before proceeding with the tax demand?

Decision of the Court

The High Court disposed of the petition by noting that the petitioner chose not to press the relief regarding the constitutionality of Section 16(2)(c) at this stage, reserving the right to agitate the issue later.

The court directed the competent authority to perform a fresh consideration of the petitioner’s objections and documents, specifically focusing on the genuineness of the transactions and whether payments, including GST, were actually made to the supplier.

To ensure compliance with a strict timeline, the petitioner is required to file their response and relevant supporting documents within 28 days from the date of the order, after which the competent authority must pass a speaking and reasoned order within six weeks.

Finally, the court established a consequence of default, stating that if no objections are filed within the 28-day window, the authority is permitted to proceed in accordance with the law, treating the matter as if the petitioner has no further response to provide.