AP HC Dismisses Writ Petition for Manual ITC Claim, Emphasizes Electronic Submission via GST ITC 02 Form

The High Court of Andhra Pradesh has rejected the Writ Petition filed by an assessee opposing the rejection of the GST input tax credit (ITC) claim made manually instead of electronically submitting Form GST ITC 02. The court noted that the taxpayer did not provide evidence to the respondent even after being given an opportunity.

Tikona Infinet Private Limited (TIPL), is the petitioner who has filed this writ petition requesting a Writ of Mandamus under Article 226 of the Constitution of India. The purpose is to declare the disputed show cause notice in Form GST DRC-01, issued by the Deputy Assistant Commissioner, State Taxes, Dabagardens Circle, Visakhapatnam-1 Division, Andhra Pradesh, as unlawful, arbitrary, and in violation of the Central Goods and Services Tax (CGST) / Andhra Pradesh Goods and Services Tax (APGST) Act and Rules. The petitioner seeks to have the petition overruled.

A Declaration request has also been made by the petitioner that the Input Tax Credit (ITC) claim cannot be rejected on grounds of physical transfer rather than electronic submission of Form GST-ITC 02 under Section 18 (3) of the CGST Act read with Rule 41 of the CGST Rules, as the option to file Form GST-ITC 02 electronically was not available.

The petitioner, TIPL, is a Company registered under the Companies Act, 1956, and is operating as an internet services provider across India from various States, including Andhra Pradesh. A show cause notice has been issued by the 3rd respondent, the Deputy Assistant Commissioner, State Taxes in Form GST DRC-01.

It was determined that the petitioner demanded ITC amounting to Rs. 31,81,529/- in violation of the provisions of Section 16 of the APGST Act 2017. As a result, it was proposed to impose a penalty of Rs. 31,81,529/- for the excess input tax claim beyond the eligibility according to the APGST Act 2017. Additionally, the petitioner proposed to pay Rs. 38,46,389/- for the found differences mentioned in the notice.

The petitioner was also informed that they were accountable for paying interest in accordance with Section 50 of the GST Act 2017 for the underpayment of taxes.

The petitioner, TIPL, entered into a Business Transfer Agreement (BTA) with Tikona Digital Networks (TDN), through which TDN’s business was transferred to the petitioner as an ongoing concern. It is stated that TDN sent a letter dated 13.09.2017 to the Commercial Tax Officer, notifying that as per Rule 41 (1) of CGST Rules, a registered person intending to transfer the input tax credit must file GST-ITC 02 on the common GSTN portal to the transferee. TDN intended to transfer the unused credit in TDN’s electronic credit ledger to TIPL on the date of the slump sale. However, Form ITC-02 was unavailable on the GSTN portal, making it impossible for TDN to transfer it electronically, and TIPL was unable to utilize the credit balance in TDN’s electronic credit ledger.

The Assistant Commissioner (ST) issued a notice, GST ASMT-10, informing about the differences in the return after scrutiny and requesting a clarification for the differences. The petitioner was provided with an opportunity to give clarification and present evidence before the 3rd respondent.

A division bench consisting of Justice Ravi Nath Tilhari & Justice A V Ravindra Babu noted that the petitioner has not been denied the opportunity to claim input tax credit at present, however, a show cause notice has been sent giving the opportunity.

The petitioner has the chance to present essential documents as evidence, and upon verification, the authority has yet to determine the petitioner’s input tax credit claim. The argument was made that the petitioner should approach the authority initiating the show cause notice, who should submit objections supported by proof and, if preferred, ask for a face-to-face meeting by notifying the appropriate entity.

Given that the period for the petitioner to file objections and appear before the relevant authority has already expired, the court held that if the petitioner submits objections with evidence and expresses a willingness for a personal hearing within one week from the receipt of this order’s copy to the relevant authority, it shall be considered and decided as quickly as possible, preferably within four weeks from the receipt of this order’s copy, as per the provisions.