Court confirms penalty and interest for RMZ Infinity in GST dispute, citing suppression of facts and reversal of Orissa High Court decision.
In a significant ruling, the Madras High Court has upheld the extended period of limitation for availing ineligible Input Tax Credit (ITC) under the GST regime, as prescribed under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017. The court's decision came in response to a writ petition filed by RMZ Infinity (Chennai) Pvt. Ltd., now known as Chennai Business Tower Private Limited, challenging an impugned order that confirmed a substantial demand for ineligible ITC availed by the company.
The petitioner, RMZ Infinity, engaged in the business of renting and leasing immovable properties, had availed ITC based on a previous ruling by the Orissa High Court in the Safari Retreats case. However, this decision was later reversed by the Supreme Court, leading to the current dispute.
The Madras High Court, presided over by Justice C. Saravanan, found that the petitioner had availed ITC without the department's concurrence, contrary to statutory prohibitions under Sections 17(5)(c) and (d) of the CGST Act. The court noted that the petitioner had failed to declare ineligible ITC in the prescribed format in their GSTR-3B returns, establishing mens rea for invoking Section 74 due to suppression of facts.
The court dismissed the petitioner's challenge against the show cause notice and the subsequent order-in-original, which demanded the reversal of Rs. 92,29,09,162/- in ineligible ITC and imposed a penalty equivalent to the tax amount. It held that the bunching of proceedings for different tax periods was justified, referring to a Karnataka High Court decision in the Chimney Hills case.
Justice Saravanan emphasized that the petitioner's actions contravened several legal provisions under the CGST Act, including the improper declaration of ITC in incorrect sections of the GSTR-3B form. The court concluded that the suppression of material facts and the lack of departmental approval justified the invocation of the extended period of limitation.
The court also granted the petitioner the liberty to file an appeal against the impugned order within 30 days, providing an opportunity to contest the decision further.
This ruling reinforces the stringent adherence to GST provisions concerning ITC claims and highlights the judiciary's role in interpreting complex tax laws to ensure compliance and prevent evasion.
Bottom line:-
GST Law - Input Tax Credit (ITC) - Extended period of limitation under Section 74 of CGST Act justified for availing ineligible ITC based on suppression of facts and reversal of Orissa High Court decision in Safari Retreats case.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Sections 16(4), 17(5)(c), 17(5)(d), and 74, IGST Act, 2017 Section 20, CGST Rules 2017 Rule 61.
