The Gujarat High Court while granting 6 weeks time to the GST Authority for the investigation refused to direct the GST Authority to give back the credit of the ITC during inquiry or investigation.
The applicant, S.S. Industries has sought the ruling on the issues whether the authority concerned is empowered to retain any amount deposited by a registered person during any inquiry or investigation in the absence of any confirmed liability against the assessee and, more particularly, without issuance of a show-cause notice and assessment/adjudication order imposing any tax liability on the assessee.
Mr. Paresh M. Dave, the counsel for the applicant urged that there is no assessment by following the mandatory procedure as prescribed under Section 74(1) of the CGST Act by issuing the show-cause notice and there is no order under Section 74(9) of the Act, determining the short payment of tax as a result of the alleged wrong availment of ITC.
Mr. Devang Vyas appearing for the respondent authorities argued that the newly inserted Rule 86A confers power upon the authority concerned to block the ITC if it is prima facie found that the transactions are fraudulent.
The division bench headed by Chief Justice Vikram Nath and J.B.Pardiwala concluded that there are highly disputed questions of fact as regards the debit of the ITC from the electronic credit ledger and the investigation is in progress. A prima facie case could be said to have been made out against the writ applicants.
However the Court observed that the investigation cannot continue for an indefinite period of time. Almost more than a year has elapsed and, in such circumstances, the authorities concerned should arrive at some conclusion or the other.
Even Rule 86A of the Rules prescribes a one-year time limit. In such circumstances, the Court directed the respondent authority to complete the investigation within a period of four weeks from the date of the receipt of this order and take an appropriate decision whether any case has been made out for issue of show-cause notice under Section 74 of the Act or not.
“At the fag end of the investigation, we do not deem fit and reasonable to pass an order in exercise of our writ jurisdiction directing the respondents to give back the credit of the ITC to the writ applicant and permit them to avail the same. Therefore, we are saying that let the investigation be completed within six weeks and an appropriate decision shall be taken and communicated to the writ applicant,” the Gujarat High Court said.
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