The court ruled that retroactive tax demands must be supported by appropriate show cause notices as per statutory requirements; failure to issue such notices invalidates new assessments.

JUDGMENT : 

Raja Basu Chowdhury, J. (Oral):

1. Challenging the order dated 11^th January 2024 passed by the appellate authority under Section 107 of the WBGST / CGST Act, 2017 (hereinafter referred to as the “said Act”), the instant writ petition has been filed.

2. Mr. Majumdar, learned advocate appearing for the petitioner has drawn the attention of this Court to the show cause issued in form GST DRC – 01 dated 12^th April 2023 for the period from 1^st July 2017 to 31^st March 2018. By referring to the discrepancy no. 2 he submits that when the aforesaid discrepancy was first notified in a proceeding under Section 61 of the said Act in Form GST ASMT 10 intimating short payment of tax on inward supply (RCM) amounting to Rs.176,905/-, the petitioner had duly clarified its position by indentifying payment of tax in form GST DRC -03 dated 6^th February, 2020. Consequent thereupon, when the show cause notice was issued by considering the response given by the petitioner, the claim on account short payment of tax was dropped since it was noted that the petitioner had made payment in Form GST DRC – 03 on 6^th February 2020. However, since there was outstanding liability by reason of delayed payment, the petitioner was called upon to make payment of interest amounting to Rs.69,800/- on IGST on account of late payment of applicable tax.

3. According to Mr. Majumdar, once an issue is dropped in the show cause and confirmed in the order passed under Section 73 of the said Act, the same could not have been included by the appellate authority on an appeal filed by the petitioner from a determination made under Section 73 of the said Act. In this context, by referring to the order of the appellate authority dated 11^th January 2024 he submits that the appellate authority had added back the said demand, inter alia, on the ground that such payment was wrongly made by showing place of supply as Uttar Pradesh instead of West Bengal and accordingly, the appellate authority held that such amount had remained unpaid, though in fact, the petitioner had paid the same.

4. Independent of the above, he submits that insofar as discrepancy no. 1 is concerned which forms part of the show cause, the same though confirmed by the proper officer in the order determining liability under Section 73 of the said Act insofar as the same relates to excess availment of ITC amounting to Rs.43,79,728.73/-, however, the appellate authority had accepted the explanation provided by the petitioner by re-verifying the returns filed by the petitioner in Form GSTR – 3B, the annual returns in form GSTR – 9 and the returns filed in form GSTR – 9C with the auto generated statements in form GSTR – 2A and came to the conclusion that the case of excess availment of ITC on account of IGST to the extent of Rs.43,79,728.73/- does not arise.

5. Notwithstanding the above and despite acknowledging that the petitioner had not availed excess ITC, the appellate authority on the basis of perusal of the records had noted that the petitioner had made reversal of tax (IGST) to the tune of Rs.2,04,203/- for the period 2017-18 through form GST DRC – 03 on 6th February 2020 and accordingly has held the petitioner liable for payment of interest, for having paid IGST of Rs.2,04,203/- after the due. According to Mr. Majumdar the aforesaid determination could not be enlarged by the appellate authority by incorporating fresh demand that too without issuance of show cause under Section 73 or Section 74 of the said Act as the case may be. Independent of the above, it is submitted that the petitioner has been denied the benefit of ITC for the petitioner having filed the returns beyond the original prescribed period.

6. According to him having regard to the provision contained in Section 16(5) of the said Act, the above demand is no longer sustainable as admittedly, the returns filed by the petitioner in form GSTR 3B under Section 39 of the said is within the extended period as provided for under Section 16(5) of the