Court says tax authority failed to properly examine reconciliation documents and must pass a fresh reasoned order after hearing the company
The Sikkim High Court has quashed an order confirming recovery of alleged excess budgetary support from Lupin Limited under the Budgetary Support Scheme and sent the matter back for fresh consideration.
A bench headed by Chief Justice A. Muhamed Mustaque held that the tax authority did not properly consider the company’s explanation and supporting documents before concluding that excess support had been claimed. The Court said that where an assessee produces reconciliation statements, invoices and account details to show that Input Tax Credit (ITC) reflected in GSTR-2A was not actually available for utilisation, the authority must examine each explanation and give reasons for accepting or rejecting it.
The case concerned budgetary support granted to Lupin Limited for the period July 2017 to March 2018 under the scheme notified by the Department of Industrial Policy and Promotion on 5 October 2017. Under the scheme, eligible manufacturers were entitled to support based on a percentage of Central Tax and Integrated Tax paid through the cash ledger after utilisation of eligible ITC.
Lupin had originally claimed Rs. 12,63,99,662 and was granted Rs. 12,48,27,999. Later, the department alleged that the company had received excess support and initially sought recovery of Rs. 41,64,578. Following earlier proceedings before the High Court, the amount was revised to Rs. 37,93,159. The department also ordered recovery with interest at 15 per cent per annum and adjusted Rs. 75,40,592 from a refund otherwise payable to the company for April to June 2024.
The company challenged the Order-in-Original dated 7 January 2025 and the consequential adjustment order dated 10 March 2025, arguing that a figure had been inadvertently disclosed in Table 8C of GSTR-9 and was wrongly relied upon to infer excess budgetary support.
The High Court observed that the central question was whether the ITC shown in GSTR-2A was in fact legally available and capable of utilisation. It held that this issue could not be decided without considering the company’s documentary explanation in detail. Since the authority had not undertaken that exercise properly, the Court found the orders unsustainable.
Accordingly, the Court set aside the impugned orders and directed the respondents to reconsider the matter afresh after giving Lupin an effective opportunity of hearing. The company has been asked to produce the necessary documents to show why the ITC reflected in GSTR-2A was not available for utilisation, and the authority must pass a fresh reasoned order dealing with each explanation. The exercise has to be completed within two months.
Bottom Line :
Budgetary Support Scheme - Recovery of alleged excess budgetary support - Where assessee explains that ITC reflected in GSTR-2A was not legally available for utilisation and supports such plea by reconciliation statements, invoices and account details, authority must consider each explanation and record reasons for acceptance or rejection - Non-speaking order liable to be set aside and matter remanded for fresh consideration.
Statutory provision(s): Budgetary Support Scheme notified by Department of Industrial Policy and Promotion (DIPP) dated 05.10.2017, Goods and Services Tax law provisions relating to Input Tax Credit (ITC), GSTR-2A, GSTR-9, Central Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017
Lupin Limited v. Union of India, (Sikkim) : Law Finder Doc id # 2985332
