An unexpected issue emerged, in which it was stressed that technicalities made via the Department and not the assessee must not be put forth by the department to defeat the legal rights and entitlements of the assessees.

It was carried out by the Bombay High Court that the related Revenue officials (respondent) could not refuse the advantage of the accrued Input tax credit to the taxpayer (applicant) merely because the specified forms had not been furnished electronically but furnished manually.

Since the GST ITC-02 Form was not available for electronic filing, neither the applicant nor TDN could be held responsible for not submitting Form GST ITC-02 electronically on the department’s common portal, the Court stated.

Consequently, the Division Bench of Justice M.S. Sonak and Justice Jitendra Jain asked the respondents to regard the manually filed forms via the TDS as expeditiously as feasible.

The bench therefore specified that if on the due consideration of manual forms the respondents still discovered that the ITC of Rs 18,30,58,995 was not due or was claimed erroneously of and used by the applicant, they are free to pass a relevant order.

Case Facts

The applicant has the business of providing internet services, entered in the Business Transfer Agreement (BTA) with Tikona Digital Networks (TDN), where TDN business was transferred before the applicant as a present concern. Hence TDN approached the AO jurisdictional notifying them of the non-availability of Form ITC-02 functionality on the department’s common portal.

TDN has the objective to transfer unused credit in its electronic credit ledger on the date of slump sale before the applicant. However as Form ITC-02 was not available till now on the GSTIN portal for filing, TDN can not follow with the electronic filing need of the mentioned form.

The applicant in the second half of the year 2017 claimed the ITC to the tune of Rs 18.30 crores. As the respondents do not incur the available electronic facility to file Form GST ITC-02, the applicant has furnished the form manually.

The applicant has received a notice after 6 years alleging that the applicant has erroneously claimed and used the ITC of Rs 18 crores, as the applicant manually furnished the forms. Therefore the applicant has approached the HC contesting the notice and the demand asked from the Respondent department.

High Court Observations

The Bench remarked that the only claim made in the show cause notice is related to the non-electronic submission of Form GST ITC-02 on the department’s shared portal.

The Bench expressed the view that these allegations would be valid if the Department’s shared portal were operating properly, allowing TDN or the petitioners to submit Form GST ITC-02 electronically through it.

The Bench acknowledged that the TDN or the petitioner was unable to submit Form GST ITC-02 on the department’s shared portal during the applicable period due to functionality problems associated with that portal.

Therefore the Bench noted that after the same has been considered that Form GST ITC-02 was not e-filed on the shared portal of the department as it was not operational to generate and accept the Forms, the issuance of the Show cause notice (SCN) is to practice of excessive jurisdiction under the CGST act and the rules.

The Bench noted that the petitioner only claimed the ITC after the CA’s certificate was submitted, which confirmed that the business transfer from TDN to the Petitioner included specific provisions for transferring liabilities.

Respondents can have processed the forms and wished on the issued of ITC if they had problems with the Form GST ITC-02 or GSTR-3B manual filing, the bench said.

The bench outlines that the respondents on the specious plea can not have avoided processing the manual return that Section 18(3) & Rule 41(1) of the CGST Act and Rules identify only electronic filing and not manual filing.

Similarly, the Bench determined that the Allahabad High Court observed that, at the time when BTA transferred its business along with liabilities to the petitioner, the option to file Form IT-02 was not accessible on the department’s common portal, thus ruling that the petitioner should not be denied the ITC.

Moreover, the Gujarat High Court, Delhi High Court, and Bombay High Court determined under the same conditions that the Department’s failure to recognize and transfer the ITC owed to the petitioner was highly unlawful, the Bench noted.

It was therefore specified that the respondents were bound from duty to take cognizance of the decisions of the Allahabad, Gujarat, and Delhi High Courts in dealing with the almost same problem related to the applicant, the Bench quashed the SCN asking for the ITC and permitted the petition of the taxpayer.

It was specified by the Bench that if the respondent concludes that the Input tax credit (ITC) was claimed erroneously. Then the respondents can take action by complying with natural justice.

Probing into a fake Pune based company registered in the name of an auto rickshaw driver, officials of the Directorate of GST Intelligence (DGGI) have unearthed a major fake GST firm scam to the tune of Rs 5,000 crores to Rs 8,000 crores.

Rushi Prakash (39), an officer at DGGI, Pune Zonal Unit, lodged the FIR in this case at the Koregaon Park police station in Pune city on Friday.

The prime accused Ashrafbhai Ibrahimbhai Kalavadiya (50), resident of Surat, Gujarat, is alleged to have opened as many as 246 fake GST firms, using which he committed the multi-crore fraud.

Along with Kalvadiya, police have also booked Nitin Barge, Faizal Mevalal, Nizamuddin Khan, Amit Tejbahadur Singh of Ulhas Nagar, Rahul Baraiyya, Kaushik Makwana, Jitendra Gohel and others in this case, under Indian Penal Code (IPC) sections 420, 465, 467, 471, 120 (b), 34 and sections of the Information Technology Act, the FIR stated.

As per police records, in October 2023, the DGGI team came across suspicious transactions of online accounts of ‘Pathan Enterprises’ located at Girni Shewalwadi on Pune Solapur highway in Pune.

During investigation, DGGI found that Pathan Enterprises did not exist at this spot, or anywhere else. However, it was registered in the name of Pathan Shabbir Khan Anwar Khan, a resident of Bhavnagar in Gujarat. When the DGGI team found Khan, he turned out to be an auto rickshaw driver, who was completely unaware of the company registered in his name.

Further probe revealed that multiple fake GST firms were registered with a particular mobile number and an email address of Pathan Enterprises Company. While checking the suspicious records, the investigation team came across an ICICI bank account in Rajkot, Gujarat, registered in the name of one Jeet Kukadiya. However, when GST officials checked with Kukadiya, he was found to be working as a private security guard and had opened this bank account for accused Kaushik Makwana and Jitendra Gohel. Kukadiya himself never made any financial transactions from this bank account.

Based on leads obtained during further investigation, the DGGI teams carried out raids in Pune, Mumbai, Rajkot and Bhavnagar cities.

A probe revealed that the accused Kalvadiya was operating Pathan Enterprises and several other fake firms.

Subsequently, he was arrested from a hotel in Mira Bhayandar in Mumbai on March 12, 2024. As many as 21 cell phones, two laptops, 11 sim cards, bank debit cards in the name of different persons, cheque books and rubber stamps in the name of different companies were seized from his possession during searches.

A probe revealed that he had allegedly used the seized material for forming fake GST firms and fraudulent GST and bank transactions. A probe also revealed that Kalavadiya was “buying” fake GST firms, bank accounts and sim cards to generate fake GST bills. But he never did any real business of any products and never paid any goods and services tax to the government.

DGGI sleuths arrested him under sections of the Goods and Services Tax Act. He was produced before a court in Pune on March 13, 2024, and is currently under judicial custody in Yerwada jail.

Meanwhile, further probe revealed that the accused Nitin Barge of Mumbai was allegedly looking after all bank accounts and fake GST bills of fake firms operated by Kalavadiya. Mevalal allegedly handled the cash transactions for Kalavadiya.

The accused Nizamuddin Khan, also from Mumbai, was allegedly providing him the sim cards and bank accounts opened fraudulently using KYC documents of common people. Amit Singh allegedly assisted Kalavadiya in opening fake GST firms. Rahul Bariyya was allegedly selling fake GST firms and bank accounts to people, the FIR mentions.

The probe so far revealed that Kalavadiya has opened 246 fake GST firms including Pathan Enterprises. As per the FIT, he allegedly committed a fraud of Rs 20.75 crores through Pathan Enterprises and cheated the government to the tune of Rs 5,000 crores to Rs 8000 crores through all 246 fake GST firms by evading tax between September 2018 and March 2024.