Kerala HC Dismisses ITC Dispute; Upholds Company’s Right to Appeal Against GST Section 73 Order

In a recent case of the Kerala High Court, a company had challenged a GST order issued under Section 73 for ITC claimed on purchases from a fraudulent supplier. The high court dismissed the writ petition, noting factual issues and the availability of an appeal under Section 107, allowing the company to pursue statutory remedies.

The writ petition was filed by a company named M/s. Santhom Metacast Private Limited in the Kerala High Court, challenging an Ext.P8 order passed by the GST department under Section 73 of the CGST Act.

Previously, the company had purchased certain goods from Muhammed Ajmal Palliyalil and claimed ITC (Input Tax Credit) in respect of the said purchase. Later, the GST department carried out a search operation at Muhammed Ajmal Palliyalil’s premises, where the department discovered that transactions were made by Muhammed Ajmal Palliyalil using fake registration and fake invoices, without any actual transactions. In conclusion, the department initiated proceedings against Santhom Metacast Private Limited under Section 73 of the CGST Act.

In this context, the department issued a show-cause notice (SCN) against the company. The company challenged the said notice before the present court. The court passed the Ext.P4 order, instructing the adjudicating authority to consider the objections raised by the company and, thereafter, issue the final decision.

The company also argued that authorities can use provisions of Section 16(2)C of the CGST/SGST Act to deny its ITC claim. In this context, a hearing was conducted; in conclusion to the hearing, the Ext.P8 order was passed under Section 73 of the CGST Act. The present writ petition has been filed challenging the said order. The key argument is that the company carried out the transaction with Muhammed Ajmal Palliyalil on the genuine belief that he had a valid registration, and tax dues in respect of the said transaction were also remitted. Hence, the company claimed that only because of the reason that the supplier of the company used fake transactions, the company should not be punished for the same.

After reviewing the records, the court finds that the company has an appeal option under Section 107 of the CGST Act against Ext.P8. The issues raised involve factual matters, which cannot be decided in a writ petition under Article 226. Since an effective alternate remedy is available, this court need not entertain the writ petition. Therefore, the petition is dismissed, without affecting the company’s right to pursue statutory remedies.