Judgement on issue of Reversal ITC due to non deposit by the Seller by Uttarakhand HC

Uttarakhand High Court in the  case of Narula Menthol Vs UOI & Ors has quashed the demand intimation letters issued by the GST Dept. which directed the Petitioner to reverse the ITC on the basis that the supplier from whom the goods were purchased, has failed to deposit the tax to the Govt.

The court categorically stated that the provisions stipulated under section 73 & 74 read with rules should be mandatorily followed.

The court further observed that if at all the respondents intend to take any action for the purposes of recovery of the Input Tax Credit, they would proceed with exclusively in accordance with law and particularly in accordance with the procedure provided under Sections 73 and 74 to be read with the Rules.

The copy of the landmark order is as under:

Narula Menthol Vs UOI & Ors. (Uttarakhand High Court)

WPMS No. 1476 of 2021

Order Dated 06/08/2021

This matter was taken up yesterday and thereafter, on the request of the respondents’ counsel, it was placed today.

Before the proceedings could be addressed by the learned counsel for the petitioner on merits of the matter, so far it relates to the challenge given by the petitioner to the demand letter bearing No. 9321 dated 28.06.2021, which was issued by respondent No. 2, where allegedly the demand of Input Tax Credit was the subject matter of a demand, as per the letter, which has been appended with the writ petition.

The petitioner has raised his several contentions in support of his argument, that the entire proceedings initiated on the basis of the said communication, which he alleges to be a demand letter, in fact, happens to be in violation of Section 73 of the Act, as well as the Circular, which has been issued by the Government, with regard to the effect of laying the modalities, that any references, which are required to be made for the purposes of recovery of Input Tax Credit, there has had to be reference of DIN number of the body against whom recovery is proposed, but since the learned counsel for the respondents, based on the instructions, which has been received by him from his client, has made a statement that in fact in pursuance to the demand letters which have been put to challenge, in fact, it is not an actual action of recovery, which is being contemplated to be taken against the petitioner, rather it is only an intimation of demand and hence there is no imminent threat, which is being faced by the petitioner of the recovery of the amount, which has been reflected in the impugned order.

Taking those statements on record, this writ petition is closed, with liberty left open to the respondents, that if at all the respondents intend to take any action for the purposes of recovery of the Input Tax Credit, they would proceed with exclusively in accordance with law and particularly in accordance with the procedure provided under Sections 73 and 74 to be read with the Rules.

Subject to above, the writ petition stands closed.