HC: Justifiable to Claim GST Credit Via GSTR-3B as ITC-02 Was Not Running on Portal

The Hon’ble Allahabad High Court in M/s Tikona Infinet Private Limited v. State of U.P. [Writ Tax No. 859 of 2023 dated July 25, 2023] set aside the need raised on the basis that the taxpayer rather than passing the Input Tax Credit (“ITC”) via Form GST ITC-02 transferred ITC through Form GSTR-3B and contained that the stand of the Revenue Department was incorrect as the Form ITC-02 was not live on the common portal.

Points:

M/s. Tikona Infinet Private Ltd. (“the Petitioner”) has the business of furnishing internet service in India from various States along with the State of Uttar Pradesh.

The applicant has entered into a business transfer agreement with M/s. Tikona Digital Network Pvt. Ltd. on August 17, 2017.

There is an ITC balance of more than INR 3,13,13,68,997 that M/s. Tikona Digital Network Pvt. Ltd. (TDN) has accumulated but has not been used. The petitioner attempted to transfer the ITC as per the procedure outlined in Rule 41 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”). The petitioner was permitted to transfer the unused ITC under Section 18(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). However, because the common portal did not have the option to transmit ITC, the petitioner had to manually accept and use the ITC of Rs 3,13,68,997.

On February 28, 2023, the Revenue Department (“the Respondent”) sent the Petitioner a Show Cause Notice (“the SCN”) requesting the difference ITC of Rs 2,88,35,905.60 as well as interest and penalties.

On March 13, 2023, the Petitioner submitted a response to the SCN along with a request to have the SCN withdrawn. However, the Adjudicating Authority upheld the demand in an order dated April 17, 2023 (“the Impugned Order”), dismissing the petitioner’s reply in light of the petitioner’s acceptance of the transfer of the aforementioned ITC and use of Form GSTR-3B in place of Form GST ITC-02.

Before the Hon’ble Allahabad High Court, the applicant has filed the writ asking for the legality propriety, and correctness of the Impugned order.

Subject:

Is it possible for the petitioner to manually transfer input tax credit (ITC) on the condition that Form GST ITC-02 is not accessible on the common portal?

Had:

The Hon’ble Allahabad High Court in Writ Tax No. 859 of 2023 held as under:

• Witnessed that, the non-availability of Form GST ITC-02 was there on the GST portal as the complete system was at the initial phase at the time of initial months post incorporating of this dated 1st July 2017.
• With the opinion, it formed that on the GST portal help desk the applicant would be needed to ask for the proper grievance and would need to wait for the pertinent Form to go live on the GST portal rather than creating illegal adjustments through the use of the Form GSTR-3B of the Petitioner (transferor) and the TDN (transferee company).
• Furthermore, it was stated that a lack of working capital alone could not be used as justification for avoiding complying with the law’s established legal process.
• It was decided that the Respondent’s position denying the Petitioner’s claim in light of the acknowledged fact that the GST common portal was not online could not be justified.
• Set aside the impugned order and mentioned that the Respondent was free to issue a new order after examining the Petitioner’s arguments and providing a chance for a hearing, precisely in accordance with the law.