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Whether demand can be raised when negative taxable value of outward supply is claimed as ITC?

27 May, 2024
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No, the Honorable Madras High Court in the case of Oasys Cybernetics Private Limited v. State Tax Officer [2024 TAXONATION 742 (MADRAS)] disposed of the writ petition by setting aside the assessment order in a case where the total taxable and invoice value was in negative due to erroneous reporting of Credit Notes as Input Tax Credit, thereby holding that the demand should not be raised when there is no loss caused to the government in the aforesaid scenario.The Honorable Madras High Court noted that as per the GSTR-1 statement placed on record by the Petitioner, in the heading relating to B2C total invoice value was in negative for which  a reply was filed by the Petitioner stating that the credit notes were erroneously reported as ITC. The Honorable Court opined that the explanation provided by the Petitioner was not taken into consideration as to the tallying of the amount reflected as ITC with the value of the Credit note so as to check whether there is excess a ailment of ITC.Further opined that the required exercise was not carried out and tax demand has been raised solely on the ground that the credit notes have not been duly reported in GSTR-1 or in the auto populated GSTR-2A, therefore, the Impugned Order calls for interference. The Honorable Court held that the Impugned Order is set aside and the matter is remitted back for reconsideration. 

 

Author’s Comments

Care must be taken while replying to the notice that in pursuit of parading all the truth before the Proper officer,the reply must not become an admission of wrongdoing. Any admitted wrongdoing becomes an undisputed fact that requires no further proof (Section 58 of Indian Evidence Act, 1872) and it becomes ground for confirming the demand.

 

In this instant case, if it is admitted that ITC claimed was ineligible and relief was sought on the grounds of revenue neutrality, the Proper officer was justified in confirming the demand. The quite often talked about the concept of ‘Revenue Neutrality’ is a myth and no longer existing concept in GST.

 

Topic-Oasys Cybernetics Private Limited v. State Tax Officer

Citation-2024 TAXONATION 742 (MADRAS)

 

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